What does your credit rating mean?

Couple Meeting with Financial Advisor

Have you checked your credit rating recently, and wondered what the number means? If you check your credit rating for the first time, and you receive a score of 350, you may think that’s high, but did you know that in Canada your credit score can range from 300 up to 900? Lower scores may mean that your Canadian credit history is new or non-existent, or that you have a poor bill payment history, and credit delinquencies.

So what does a good credit score look like? Generally speaking, a score above 650 will make it easier to qualify for loans or a mortgage. A score lower than that may mean that you’ll be paying a higher interest rate on a loan, or that you will be unable to qualify for a loan at all. If your credit score is low, here are some things you can do to increase it:

Lower your credit balances

Always try to keep your credit utilization ratio below 50% of your total limit. If your numbers are currently above this, look for ways to pay down your debt by cutting expenses, or increasing your monthly income.

Pay your bills on time

Late payments hurt your credit score, so it’s important to pay your bills on time, and in full. Have trouble remembering your bill due dates? Set up an automatic payment to ensure it gets paid on time every month.

Use a credit card

Having and using a credit card is a good way to build credit history, or rebuild credit. When using a credit card, remember that it is not “free money”, and try to pay it off in full every month to avoid paying interest. Follow the rule, “if you don’t have the money to pay for something, you don’t buy it”.

How often should I check my credit rating?

Check your credit rating with Transunion or Equifax at least once a year. This will allow you to get a sense of what your credit history looks like, and you can also check your history for any errors such as a wrong mailing address, or account errors. You can receive your credit report once a year from each company, but if you would like to see your actual score, you will have to pay a fee for it.

Checking your credit report can also alert you to identity theft; if you see credit checks you did not authorize or accounts that you did not open, this could mean that your identity has been stolen. With identity theft, the sooner you catch it, the better.