Understand & Improve Your Credit Score

Category: Academics

If you are looking for ways to better your financial situation, one of the first tasks you should be focusing on is how to build your credit score. Your credit score is a measure of your demonstrated ability to meet your loan commitments and other bills in a timely manner. It is one of the key metrics to measure your financial progress. The higher your score, the more likely a lender is to loan you money and the lower the interest rate you will receive. What is a good credit score? In Canada, your credit score is derived from a credit report issued by either TransUnion or Equifax and the credit score range is between 300 and 900. The Canadian average is around 650. Good credit scores over 750 offer a higher chance of loan approval, greater borrowing limits, and lower interest rates and insurance premiums. If you want to get the lowest advertised mortgage rates you are going to need a top-notch credit score. At the other end of the scale, a low credit score of under 600 may make it very difficult to get a mortgage from a Canadian bank. Potential interest savings from an excellent credit score are huge on big-ticket items. Qualifying for a preferential rate on your mortgage could easily save you tens of thousands of dollars. For example, an excellent credit score could qualify you for a $500,000, 5-year fixed mortgage at 4.5%, while a low credit rating could see you paying near 6%. You would save $20K+ during that 5-year period! Vehicle loans offer even greater variation depending on your credit rating and are another area where a bad credit score will take a lot more money out of your pocket every month.