A good credit score is more than just a number. Lenders use this calculation to determine creditworthiness and how likely a borrower is to repay a loan. Quite simply, the lender can weigh an applicant’s risk level.
That means a good credit score can be the difference between an exemplary interest rate and a less than ideal interest rate. It can also improve the chances of getting approved for more significant amounts of credit or certain products, like a mortgage, for example.
For those that are credit-active, a credit score is always in flux and needs to be maintained. However, new credit consumers need to build a credit score, and those with poor credit history must rebuild their rating, which takes time.
For this reason, it is vital to stay up to date with your credit report and that critical three-digit number — your credit score. Doing so can help you track your progress, prepare for big life milestones, and catch any suspicious activity.
Learn what a good credit score is and what you can do to improve or maintain your rating.
Credit scores range between 300 and 900, with higher numbers being more desirable.
Although each credit bureau or bank may have a slightly different method to calculate credit scores, they generally fall within this range:
Those with credit scores below 660 may find it challenging to get approved for credit or pay higher interest rates.
Pro tip: In Canada, you can order your credit report at least once a year for free from the two main credit bureaus, Equifax, and TransUnion. Spacing out your requests every six months can help you stay informed throughout the year.
These are useful guidelines to follow, though it is important to note that each credit bureau, bank, or financial institution will have its method and interpretation of a credit score.
Ultimately, using credit responsibly over several years and maintaining healthy financial habits can result in a good, if not very good, credit score.
Here are some things you can do to improve or maintain your score:
On the other hand, bad credit information can have adverse effects on your credit score and stay in your credit report for several years. Fortunately, there is always room for improvement if you find yourself in this situation. Again, credit scores fluctuate. So, if your score goes down, it can always come back up.
Lastly, you should contact both Equifax and TransUnion if you believe there has been an error on your report. Sometimes it happens. Whether it’s a mistake from having a common name or identity theft, it is crucial to sort out these details and protect your score.
A good credit score can help you reach your financial goals and, ideally, get the best loan terms and interest rates.