2021 / 02 / 16
What does your credit score mean to a potential lender? Credit scores range from 300 to 900 and in Canada, approximately 70% of the population have a credit score between 700 and 849. Only 5% of Canadians have a score of 850 or higher. The higher your credit score, statistically, the more likely you will repay a debt.
A credit score of 800 or higher tells potential creditors there is only a 1% chance of non-payment. A more common credit score of 700-749 suggests there is only a 5% chance of non-payment. However, a credit score below 500 tells potential creditors there is a 78% chance of non-repayment.
You can boost your credit score over time by keeping the following tips in mind:
- Contact Equifax and/or TransUnion to get a copy of your credit report and credit score
- Use resources on Equifax, TransUnion, and the Financial Consumer Agency of Canada websites to learn how to read and interpret your credit report.
- With every credit report request comes a correction sheet — use it to correct errors and to dispute any derogatory information appearing on your report that does not belong.
- Always pay on time — timely payment accounts for approximately 35% of your credit score.
- Watch credit utilization — the percentage owed versus available credit limit. Ideally, you do not owe more than 35% of the available credit limit. If you have debts where you owe more than 35% of the available limit, focus on paying these debts down first if your goal is to boost credit score. Credit utilization accounts for approximately 30% of your overall credit score. This tip includes rewards credit cards — even if you pay the balance in full every month, using one card for all purchases to gain rewards can hurt your credit score if it means running up the balance beyond 35% of its limit on a frequent basis.
- Keep oldest credit open — the age of existing credit accounts for approximately 15% of your credit score. Hold on to your oldest credit accounts and keep them in good standing.
- Do not let 3rd parties check your credit unless absolutely necessary — these types of enquiries count as hard-hits and will impact your credit score.
- Do not apply for new credit if you already have plenty.
If you have questions about credit score, or if you have credit that has gone delinquent and do not have the income to get caught up, or do not know where to start; please do not hesitate to contact our office for a free consultation to explore your options to tackle debt.