How is your credit rating?
For most people, this ethereal credit score is a thing of stress. Whether you have great credit, average credit or poor credit scores, it is often top of mind. And the mere mention of pulling your credit score can often make us break out into cold sweats! While the majority of people understand that their credit score will affect things like obtaining loans and credit cards, there are some little-known facts about your credit rating that are worth talking about and understanding.
1. LOW CREDIT SCORE CAN COST YOU MONEY:
More and more lenders have started rewarding people with high credit scores by offering lower interest rates on things like car loans, mortgages and credit cards. And that means that for the rest, the people with lower credit ratings, are paying much higher rates of interest. This, of course, is to cover the cost of lending to “higher risk” borrowers but, in the end, it is a financial cost to bear in mind.
2. TAKING A LOAN AND PAYING BACK ON-TIME INCREASES YOUR SCORE:
Often people with bad credit simply avoid taking loans at all, assuming that they will be refused. But this actually sets you into a vicious circle of not having good credit, so not borrowing, so not improving your credit. In fact, sometimes the best thing you can do to improve your credit is take a loan, just make sure to pay it back on time. It is one of the quickest ways to improve your credit ranking.
3. YOU CAN PULL YOUR CREDIT REPORT FOR FREE:
In Canada, the two main credit bureaus are Equifax Canada and Trans-Union Canada. You are allowed to pull your credit report from each of them for free and you will receive them by mail. Of course, both bureaus would prefer to sell you the immediate downloadable version of your credit report, for a fee. But it is highly recommended to do a yearly check on your credit score. And it is especially important to make sure that there are no errors. Which leads us right into item #4…
4. IT IS YOUR RESPONSIBILITY TO CORRECT ANY ERRORS:
The credit bureaus are not infallible. They can, and do, make mistakes. And these errors can be very costly for you. It is your responsibility to actively verify your file and correct any errors that might be in your credit report. If you don't, these errors could stay on your credit report for years. Some errors that you may not even be aware of can affect your credit score such as, not having an address on file, not having your employer on file, and not having a social insurance number on your file.
5. MOVING OFTEN OR CHANGING JOBS:
Believe it or not, length of time at your job and length of time at your address affect your credit rating. To be quite honest, I, as the author of this blog, did not even know that until doing the research for this blog article. But, according to Debt Canada, if you are frequently changing jobs or if you move often, this can actually negatively affect your credit score. So stability is key!
6. HAVING NO DEBT IS BAD:
Who would have assumed that having no debt is a bad thing? But yes, people with no debt (meaning no mortgage, car loans, or credit cards) are unable to show the credit bureau that they can be responsible credit owners. Basically, the more responsible you can be with paying off debt, the more the credit score will reflect that responsibility.
Bad situations or bad credit history has happened to most of us at one point in our lives. Anything from bouncing a check to declaring bankruptcy can feel like it is the end of the credit-score-world. But always know that what gets torn down can always be rebuilt. It might be a slow go but it is definitely worth the climb.