So, you've decided to pull back the curtain and have a peek at your credit score.
First of all, kudos to you! Your credit score, after all, is a pivotal component of your financial profile. Whether you're planning a significant purchase, considering a loan, or simply want to stay informed, understanding this number is crucial.
But once you’ve decided that your credit score is something that you want to look into, where do you even begin?
Fret not; in this article, you will learn everything you need to know.
What is a credit score?
Think of a credit score as the pulse check of your financial health.
This number sits between 300 and 900 and it reflects how responsibly you've managed your finances and credit.
Here's a quick breakdown:
300-579: Poor. Creditors might be wary about lending.
580-669: Fair. You're on track but could use some improvement.
670-739: Good. Most lenders give a thumbs-up.
740-799: Very good. Lenders will welcome you with open arms.
800-900: Exceptional. You're the cream of the credit crop.
A high score can unlock better interest rates, favourable loan terms, and even certain job opportunities. While having a low credit score can be a big hurdle in achieving certain financial milestones.
Where to find your credit score in Canada
Alright, now that we've got the basics down, let's talk about where you can actually get your hands on this number:
Credit Bureaus: The major guardians of credit scores in Canada. Two main credit bureaus are the harborers of this information
Equifax: With Equifax, you can request a free credit report annually, but the credit score itself might have a fee. There are also subscription services where, for a monthly fee, you can access your score and report anytime.
TransUnion: Similar to Equifax, Transunion offers a free annual report, but the score might come at an additional cost. They also have monthly services that offer regular access to your score.
Your Bank: The easiest, and often free way to check your score might just be with your bank. Many Canadian banks, in partnership with credit bureaus, now provide free access to your credit score via their online portals or apps.
Check your bank's website or inquire in-branch to see if this service is available.
Third-party Services: Several online platforms in Canada offer a free peek into your credit score:
Credit Karma: Offers free weekly updates of your TransUnion credit report and score.
Borrowell: Provides free monthly updates of your Equifax credit score and report.
Credit Card Statements: Some credit card companies in Canada provide your credit score as part of your monthly statement, especially if they've partnered with one of the major credit bureaus.
Mortgage Brokers: If you're exploring home ownership, your mortgage broker might pull your score as part of the pre-approval or lending process. They can share this with you.
Remember, while you can access your credit report for free annually from the major bureaus, the score itself might come with a fee when ordered directly. However, with the increasing number of third-party services and banking partnerships, there are ample opportunities to access your score for free or at a minimal cost.
How are credit scores calculated?
Navigating the realm of credit scores often leaves one with a key question: What is the hidden formula that brews this number?
In Canada, your credit score is concocted using a mix of financial factors, each holding a different weight, these include:
Payment History (35%)
Credit Utilization (30%)
Credit Length (15%)
New Credit Inquiries (10%)
Types of Credit (10%)
In essence, responsible financial behaviour across these facets can positively bolster your score. Conversely, missteps might weigh it down.
KOHO Credit Building Services
Now that you've peeked behind the curtain of credit score calculations, are you thinking of ways to optimize yours?
KOHO's credit-building subscription is a completely holistic approach and it acts as a beacon for those looking to build or restore their credit.
Nick is a freelance writer and entrepreneur with a particular interest in business finance. He's been featured in publications like Popular Mechanics and Apple News