Your credit score is a must-read for your financial literacy.
A credit score is an important factor in determining your creditworthiness. Your credit score can have a huge impact on your financial life.
That is why Canadians have been flocking towards free third-party credit scores services, like Compare Hub and others. These services allow Canadians unlimited access to their credit scores, to help them keep better track of their credit. But is this a good idea?
Credit scores are financial instruments that lenders use to evaluate a borrower’s likelihood to make payments on time. It is a way to tell the lenders how you handle debt.
The higher your credit scores (300 – 900) the less risky you’ll seem as a borrower. This helps you qualify for a loan at a better interest rate.
In general, those with credit scores of 650 and above should have no problems being approved for a standard loan. On the other hand, those with lower credit scores may find it hard to qualify for a regular bank loan or gain access to lower interest rates.
Overall, there are many benefits to checking your credit scores, so many consumers are taking advantage of these free credit score services.
If you don’t urgently need a loan, it’s recommended that you try and improve your credit scores before applying with any lender. This could help you from having to rely on high-cost loans like payday loans and auto title loans.
Similarly, improving your credit can lead to better lean terms including lower interest rates.
Yes, and you should check it regularly.
Your credit scores are calculated using the information in your credit report. As such, checking your credit report for inaccuracies, credit fraud, and identity theft is important. It can help you identify potential factors that may be negatively affecting your credit scores.
While there are many free credit score services available, plenty of people are skeptical about whether or not they are accurate or even useful. After all, how can a business make a profit when their products are advertised as “free”?
The credit score you see through third-party credit score services may not be the same as the one your creditors or lenders will see. While many of these service providers have partnered up with Equifax or TransUnion, the credit scores that they provide are based on their own credit scoring model.
An exception to this is Compare Hub, which provides the Equifax score and lets you see your Equifax credit report.
Similarly, many creditors and lenders have their own credit scoring model, and as such may calculate your credit scores differently than the third-party credit scoring providers. Due to the variety of ways a credit score can be calculated, the score you see is generally not the same as the one your lender sees.
That being said, these services are still quite accurate and can provide you with a good understanding of where your credit stands.
Since there are a variety of ways to calculate your credit score, multiple versions of your credit score exist. That’s why you’ll often see a different credit score when you check with Equifax or TransUnion than you will with a private company like Borrowell or Credit Karma.
As we explained above, there are several versions of your credit score. These “free” services provide one type of score, sometimes referred to as a “client” credit score. But, lenders and creditors check something called a beacon credit score. Like your client scores, your Beacon score generally ranges from 300 to 900.
Here’s the biggest difference; your Beacon credit score is only available to businesses, not to individuals or consumers.
So, when you pull your client score from a free or low-cost credit monitoring service (including a credit bureau), it may be higher or lower than the one that a lender or creditor would see if they pulled your credit.
Although your client credit score is technically “free” through one of these services, you may be paying the provider with your personal information.
In fact, your personal and financial information can be quite valuable because it makes it easier for them to market other products and lenders to you based on your profile.
Essentially, you’re giving free credit score providers permission to access your official credit report and credit score. They can then use your information to send you marketing materials, loan offers, credit card offers, etc.
While some may actually recommend good products that can help you, they may simply push products that will earn them more money. For example, you may be shown offers from service providers with very few requirements. These offers can be particularly appealing if you’ve had trouble getting approved for credit in the past. Of course, the products come with high rates and fees.
Typically, the products that they predict will earn the best returns are pushed upon clients to compensate for the lack of profit that comes from their free credit score service.
Check out which factors affect your credit score the most.
There are other ways that a company offering “free” credit scores can make money from you, like monthly subscriptions. Since their side products and services are labelled as optional, they might offer a free trial period to hook you.
After about 30 days, the trial ends and you’re stuck paying a monthly fee or going through an annoying cancellation process.
In Canada, you can get your credit score and report from both credit bureaus in Canada. Equifax provides a credit score (and credit report) for free to any consumer. Transunion offers a consumer disclosure (which is a type of credit report) for free to all Canadians. In Quebec, Transunion also offers a free credit score with the consumer disclosure. You can also get your free credit score from third-party websites like CompareHub, Mogo, Borrowell, and Credit Karma.
| Cost | Credit Score | Credit Report | ||
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | No | Visit Site |
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | - |
FAQs Free Credit Scores
Will checking my credit score hurt my credit?
No, checking your own credit scores will not impact your credit. When you check your own credit scores, it’s considered a soft inquiry, which does not hurt your credit. Only hard inquiries can hurt your credit, which is usually performed by lenders and creditors when you apply for a credit product.Why is my Transunion and Equifax credit score different?
In Canada, everyone has multiple credit scores. That is because each credit bureau has its own credit scoring model. While the information they use may be the same, the way it’s calculated is different. Your credit score at Equifax and TransUnion may also be different because not all lenders and creditors report your information to both credit bureaus. So one credit bureau may have more or less information than the other, which can further affect the calculation of your credit scores.Are free third-party credit score services safe?
When obtaining a free credit score from a third-party service, be sure to check their reviews to see if they are a legitimate website. Some safe and popular ones in Canada are Mogo, Borrowel, Credit Verify and Credit Karma. Some common things to look for in third-party credit score services are if they use 128-bit encryption and if their website has SSL encryption.What does it mean when TransUnion is unable to verify my identity?
When creating an account with Transunion to check your credit score, you’ll be asked certain questions to verify your identity. If you’re unable to properly answer these questions, you may get an error saying “unable to verify identity”.
Free credit score providers are not trying to take advantage of you, they are simply offering a service that comes with a few conditions, as most services and products do. While they allow you to look at their version of your credit score for free, they may also use your information to market different products toward you to gain your business.
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Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.
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