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How to Check Your Credit Score

The average Canadian consumer needs a few things to perform many financial tasks. Usually, you need income and credit to rent an apartment, purchase a home, borrow money, and sometimes even to be considered for certain jobs in the legal and finance sectors. Checking your credit score helps you prepare for some of those above-listed milestones. 

What is a Credit Score

The average Canadian consumer needs credit to perform many financial tasks. A credit score is a three-digit number between 300 and 850 that represents your credit risk. The higher your credit score is, the more likely lenders will lend to you with favourable rates. The lower your credit score is, the less likely lenders will lend to you with favourable rates, if at all. 

Responsible credit activity will strengthen your score, while irresponsible credit decisions will worsen your score. Credit scores are calculated based on a model that credit bureaus don’t publicize. However, the following factors impact your credit score:

  • Payment history
  • On-time or late payments
  • Amount of debt
  • Number of credit accounts
  • Debt-to-credit ratio
  • Credit utilization ratio
  • Foreclosure records
  • Bankruptcy records

Checking your credit score is easy, and it’s a great way to stay on top of your financial health. 

Why Should You Check Your Credit Score

Knowing your credit score gives you an accurate idea of your current credit position. The knowledge also helps you picture what lenders see when they are assessing your application for a loan. 

Credit score awareness also makes you aware of any inaccurate or incomplete personal information or credit information on your profile. Credit bureaus are run by humans, so there’s always a possibility for error. 

If you notice any inaccurate information on your credit report, inform the credit bureau right away. Although it is possible that the inaccuracy on your credit file was due to human error, there is always the chance of identity theft. To avoid identity theft, never share your personal information with anyone. 

Hard Checks vs Soft Checks

There are two different kinds of credit checks – hard checks, also known as hard inquiries, and soft checks, also known as soft inquiries. Some people hesitate in checking their credit score because they fear the check will impact their credit score. However, that is not true. 

If you decide to check your credit score by yourself, that check is a soft inquiry. Soft inquiries do not impact your credit score. Soft inquiries also occur when a company generates a promotional credit card. 

If a company, often a lender, checks your credit before deciding on a loan application, that check is a hard inquiry. Hard inquiries stay on your credit report for up to 36 months. Recent hard inquiries indicate that you’re looking for credit, which lenders can interpret either negatively or positively, depending on your personal situation. 

How to Check Your Credit Score

You can check your credit score for free. Recently, Equifax changed its rules and now offers free online credit checks to all Canadians. Meanwhile, TransUnion only does so in Quebec (because of new legislation). Otherwise, anyone can follow the instructions on the link to get your score free via mail.

The two main credit bureaus – Equifax Canada and TransUnion allow you to check your credit score online, at a cost. Both bureaus offer a service that allows you to check your credit anytime and receive updates when your score changes; however, you would need to pay a monthly fee, usually around $20, for the service. 

Some banks allow you to check your credit score through online banking, and this check is considered a soft inquiry. 

Final Thoughts  

Your credit score affects your borrowing power, so it’s wise to be aware of your credit status regularly. Even if you pay your bills on time and practice responsible credit use. Check your credit score online for free AnnualCreditReport offers free credit checks.

Alternatively, the two main credit bureaus allow you to check your credit score online. Whether you receive an Equifax credit score or a TransUnion credit score doesn’t matter, as both are legitimate. If you’re interested in learning more about financial health and dealing with debt, talk to one of our credit counsellors today. 

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