While credit scores play a significant role in life's biggest financial decisions, they also greatly influence our daily expenses. Credit scores are three-digit numerical values that range between 300 and 850. Most people's credit scores are in the 600s and 700s. A high credit score signals that you are financially responsible and less of a risk to a lender or creditor. People with high credit scores are not only more likely to secure a loan, but are also more likely to pay lower interest rates on that loan.

A low score signifies that you are a higher financial risk to a lender or creditor. Someone with a low credit score is typically offered higher interest rates, higher monthly cell phone fees and higher minimum monthly credit card payments than someone with a high credit score. Buying a home, securing home or car insurance, applying for a job, and setting up utilities are just a few of the many financial decisions significantly influenced by a credit score.

About Your Credit Score

Credit scores are calculated using mathematical formulas based on information contained in credit reports. The following items contained in your credit report are used to calculate your credit score:

• Payment history: Do you pay your bills on time, indicating that you are trustworthy and responsible?
• The amount owed and total available credit: Are you already committed to repaying a lot of debt, thus making you less capable of paying down additional debt?
• The length of credit history: Have you had accounts open with your current creditors for a long period of time?
• The type of credit open: Do you have a wide variety of types of credit, proving you manage your money well?
• New credit: Have you recently applied for new credit lines? This often signals an imminent financial crisis, as most people facing bankruptcy will apply for and open as much credit as possible.

Why Credit Scores Matter

Because your credit score is used to estimate your likelihood of defaulting on a loan or other debt, it is essential that you understand your credit score. Check your credit score and review your credit report to identify potential errors and inaccuracies, and take action to correct them.

A credit score is not a stable or fixed number and changes frequently because information in your credit report is constantly changing. Your credit report is simply a snapshot of your credit at a particular moment in time, and your credit score is calculated using that constantly changing information. Did you make a mortgage payment or pay your utility bill? Did you apply for a new loan or receive a new line of credit? It is essential that the information flowing into your credit report is accurate, as it is the basis of your credit score and is used in determining life's biggest financial decisions and opportunities.

A widespread credit score myth is that checking your own credit can affect your credit score. This is absolutely false.

Checking your credit score is considered a "soft" inquiry and does not appear on your credit report. You are encouraged to check your own credit for accuracy and to protect yourself against fraud.

Another repeated credit score myth is that closing accounts will improve your credit score. This is also false.

Two key components in credit scoring are credit history and the amount of your total debt versus your total available credit. If you close older accounts, you are shortening your credit history while simultaneously increasing your debt to credit ratio.

Check your credit score and credit report regularly to protect against inaccuracies and fraud!

Difference Between Credit Report & Credit Score

Your credit report is a comprehensive history of your financial past and it includes everything a lender would want to know about you. It lists all credit card accounts, loans and other debts you have had, details the balances of those accounts, and shows how frequently you made payments. Your credit report is compiled by private organizations called credit bureaus and these bureaus apply a mathematical equation to the information in your credit report to assign you a credit score. Your credit score is then used by lenders, landlords, utility companies, banks, employers and government agencies to gauge your creditworthiness.

Why Your Credit Report Matters

Understanding the information used to calculate your credit score and reviewing your credit report to verify its accuracy is an essential part of protecting your credit against errors and fraud. Because some credit reports can contain inaccuracies serious enough to cause consumers to be denied credit, a loan or even a job, understanding changes in your credit report is critical. Most victims of identity theft often find out too late. Reviewing your credit report and checking your credit score can alert you to errors or suspicious activities that sometimes signal identity theft. Is there a credit card or bank account you did not authorize that appears on your credit report? Do you see loans, mortgages or lines of credit that you did not approve? Do you have suspicions about your credit score or credit score questions? Check your credit score and review your credit report so you have the information you need to protect yourself against identity theft.

How to Establish a Credit Score

If you have never had a loan or a credit card, you have no credit history, so there is no information for a credit report or credit score.

So how do you get started?

Get a small loan or line of credit
Next time you are making a substantial purchase, consider applying for a loan for a portion of the purchase.
For example, if you have been saving for a vehicle purchase you may be able to finance a portion of the cost if you have 25% of the purchase price to pay down on it, even if you have no previous credit history.

There are, of course, other things to consider when applying for a loan. If a loan in just your name is not an option, perhaps you have apply as a co-applicant for a loan with a parent.

Your best course of action if you are interested in a loan is to contact one of our knowledgeable advisors for personalized advice on the best you can establish a credit score based on your situation.

Get Your Credit Score & Report

Credit monitoring is one of the easiest and most effective ways of protecting your credit against errors and fraud.
There are two main credit bureaus in Canada:

• Equifax
• TransUnion

You can order a copy of your credit report from both Equifax Canada and TransUnion Canada. Each credit bureau may have different information about how you have used credit in the past. Ordering your own credit report has no effect on your credit score.
Equifax Canada refers to your credit report as “credit file disclosure”, TransUnion Canada refers to your credit report as “consumer disclosure”.

Order by mail or fax

• Make your request in writing using the forms provided by Equifax and TransUnion
• Provide copies of two pieces of acceptable identification, such as a driver's licence or passport
• You must receive your credit report by mail

Order by telephone

• Equifax Canada: 1-800-465-7166
• TransUnion Canada: 1-800-663-9980
• Confirm your identity by answering a series of personal and financial questions
• You may also need to provide your Social Insurance Number and/or a credit card number to confirm your identity
• You must receive your credit report by mail

Get your credit report online

• You may pay a fee to order your credit report online if you want to see it right away.
• TransUnion allows you to order your credit report online once a month for free.