What's a Credit Score?
A credit score is a three-digit number that represents your creditworthiness as a consumer. In Canada, it ranges from 300 - 900 and is based on the information compiled in your credit report. Though it may just be a number, it's significance is prominent and will impact you throughout your life. It is a measure of your financial stability in front of lenders, creditors, and other parties such as insurance companies, landlords, or even future employers. A high credit score tells potential lenders that you're a financially responsible person who is very likely to repay their debts on time. While a low credit score either means you have not had enough time to build a credit score or you've struggled with financial problems in the past.
What's Included on a Credit Report?
A credit report is a file that contains your financial history. This information provides potential creditors with the means to scrutinize your personal information, public records, credit payments, and inquiries. Depending on what they see in each section will either persuade or dissuade them into offering you the credit you requested.
Why Checking Your Credit Score and Report is Important?
Having access to your credit score and report will allow you to know where you stand before a potential lender pulls your credit. Being able to check your credit will give you the upper hand when dealing with different creditors in your life. Whether you're looking to finance a car, a house, or make a large purchase, most creditors will check your credit score to determine your creditworthiness.
When a creditor or lender requests your credit report as part of their decision-making process, a hard inquiry is recorded in your credit file. Hard inquiries remain in your credit file for up to two years and can in some cases have a negative impact on your credit score. By verifying your credit ahead of time you can get ahead of the game by making decisions that will lead to more favourable results for you.
