Have you received a different credit score from a credit monitoring website than you did when applying for a car loan or mortgage? This isn’t just surprising for you: it’s a likely result. Canadians can use several free credit monitoring sites to check their score.
These scores aren’t the same as those used by banks, mortgage lenders, and credit card companies, though.
Several free credit monitoring services offer their own credit scores to help consumers monitor their credit use, including Credit Karma, Mogo, and Borrowell. These services can be useful to determine if your credit information is accurate.
Lenders don’t use these scores to determine your creditworthiness, so they are meaningless when it’s time to apply for a credit card or mortgage.
Most credit decisions in Canada are made based on the FICO score created by the Fair Isaac Corporation. This U.S.-based company sells its information and scores to two credit monitoring companies, Equifax and TransUnion. These credit bureaus also use unique calculations to determine your overall score.
More than 90% of Canadian companies that use credit scores to determine loan and creditworthiness use the FICO credit score.
Checking your credit using an online credit monitoring site is a “soft” credit check. If you preapply for a credit card or loan online, it may also generate a “soft” credit check. These checks won’t impact your credit score.
A “hard” credit check is a formal request for your credit information from FICO (or TransUnion or Equifax’s separate systems). If you need a new credit card, are shopping for a home, or finance a car, it’s considered a “hard” credit check.
You should limit credit inquiries to the ones you need. Multiple “hard” credit inquiries can drop your score because credit companies watch for consumers who may take on a lot of debt or are short on funds.
In Canada, lenders aren’t required to share the details of your FICO credit score with you. They can offer general information and make broad recommendations. You’ll get the greatest benefit from making sure the information on your credit report is accurate. Here are practical ways to improve your credit score:
When you need a credit card or a mortgage, you can have confidence in your application knowing you have a good credit score.