4 Surprising Things You Should Know About Your Credit ScoreApr 08, 2018
You’ve likely heard the terms credit report, credit rating and credit score before, but how well do you really know and understand these terms? When it comes to credit scores, credit reports, credit ratings and managing debt, there’s certainly a lot to know. To help you out, we’ve rounded up the top four things you should know about your credit score. You may be surprised to find out the following:
Surprise #1 – Most Canadians are confused about credit scores
If you are confused about credit ratings, reports and scores, you are definitely not alone. Statistics show that many Canadians have misconceptions about these concepts. In fact, it was reported in a recent study that only 56 per cent of Canadians really understand how their credit score is calculated and only 40 per cent of Canadians actually know what their credit score is.
Surprise #2 – Your credit score, credit rating and credit report are different things
You may also be surprised to learn that the term credit rating and credit score are not actually the same thing. A credit score is a three-digit number that is calculated based on certain criteria. This criteria includes your payment history, outstanding credit balances, amount of debt and types of credit you use. The higher your score, the less ‘risky’ you are considered by lenders.
A credit rating, on the other hand, is a payment record on a scale of 1 – 9. The number 1 represents the best score and means you pay all your bills within 30 days of the due date. A number 9 rating means your debt has been sent to a collection agency or that you have declared bankruptcy.
Your credit report is a detailed history of your use of credit and is kept up to date and on file by one of Canada’s credit reporting organizations.
Surprise #3 – Your credit score could affect your job prospects
Think that a low credit score only affects your ability to borrow money? You may be surprised to learn that a low credit score may also affect you in other ways. Some landlords, for example, may ask for a copy of your credit score in order to decide whether to rent to you or not. Employers may also ask for your credit score in order to determine your employability.
Surprise #4 – You can rebuild your credit score
If you think you are stuck with a low credit score for life, you’ll be happy to learn that you can rebuild and improve your score. It does, however, take some time and dedication to make this happen.
If you’ve recently filed for bankruptcy or filed a consumer proposal, your Licensed Insolvency Trustee (LIT) will help you create a plan to rebuild your credit and get you financially back on track. There are also some great tips and resources online providing solid advice for rebuilding credit ratings and scores. The personal finance blog My Money Coach, for example, has some useful tips that you can use in order to help you fix your credit.