Even before coming to Canada, you?re likely to have heard the words ?credit score?, and it?s only natural for you to be a (little bit) confused by the same, if you?re not from a country where building a credit score is in practice.
But you needn?t worry! This article will provide you the basics of the purpose of a credit score in Canada, and how you can build and maintain one.
What is a credit score?
A credit score shows a lender how risky it would be to lend you money, and the probability of you paying back all that you owe.
A credit score impacts your ability to get a credit card, loan, or mortgage. It could also affect your ability to rent a home or even get hired for a job.
How do I build good credit?
Good credit history means getting a lower interest rate on loans, saving you a lot of money over time. Credit scores run from 300 to 850: a good credit score is between 630 and 739, and a score of 740 and up is considered excellent.
There are four main ways to build good credit score:
- Make your payments on time
- Make at least the minimum payment if you can?t pay the full amount that you owe
- Contact your lender right away if you think you'll have trouble paying a bill
- Don't skip a payment even if a bill is in dispute
How do I access my credit score?
You can get your credit report (for free) from two companies in Canada: Equifax and TransUnion: these official reports are needed for several purposes, including buying a car or house, renting an apartment, opening a business, or applying for a credit card.
If you want to receive your credit report by phone, you will need to confirm your identity by answering a series of questions, and might be required to provide your Social Insurance Number and other details.
Your credit score can be accessed by post, or in person: in both cases, you will need to provide two pieces of identification, such as a driver?s license or passport.
You can also check your credit score through your banking application on your phone or online.
At Finanzo, we are dedicated to newcomers building solid financial foundations in Canada?and that involves giving you the tools to build a good credit score. Click here to find out more.
?????What are the consequences of a bad credit score?
A bad credit score in Canada could impact many aspects of your life in Canada. Examples include:
- If you?re looking to rent a house, your landlord could ask for several months? rent up front, denting your finances.
- If you?re looking to buy a home, your credit score impacts your mortgage payments, how much money you can get for a home loan, and the rate of interest for your repayments
- If you are a business owner, bad credit could impact how much funding you receive from banks, government programs, and other sources
- If you?re just starting out in business, your credit score is the same as that of the business.
??
Should I protect my credit score?
The government of Canada has some very important advice for you in this context.
?Make sure you do your research before providing a company your personal information,? says the federal government. ?Carefully read the terms of use and privacy policy to know how your information will be used and stored.
?For example, find out if your information will be sold to a third party,? it adds. ?This might result in you receiving unexpected offers for products and services. Fraudsters may also offer free credit reports or credit scores to get you to share your personal and financial information.
Also, always check to see if a website is secured before providing any of your personal information. A secured website will start with ?https? instead of ?http?.
Would you like to gain the tools needed to build a good credit score, and how it could affect you? Click here to find out more.