Welcome to Plastk’s Credit Tip Tuesday! In this segment, we will give you the tools you need to build your credit and achieve your goals. Today we are talking about what a credit score is and why it's considered an important number here in Canada.
What is a Credit Score?
A credit score is a measure of how reliable you are with your credit and how risky it would be to loan you money. Your credit score is a number between 300-900 and it helps determine your creditworthiness. Credit scores are calculated using information from your credit report. There is no “magic number” when it comes to credit scores and models may vary but usually scores from
300 - 559 are considered "poor" or "sub-prime"
560-659 are considered "fair"
660-724 are considered “good”;
725 - 759 are considered very good; and
760 and up are considered “excellent.”
Is a credit score even important?
Lenders use credit scores to determine the level of risk that a borrower will be. Higher credit scores mean that you have exhibited responsible credit behaviour in the past and will make lenders more confident in your ability to repay a debt.
If you have a score of over 700 you have a strong record of being good with your credit, because of this you will be approved for credit cards, mortgages, loans, and lines of credit. However, if you have a score of 550 or lower it will be harder for you to get approved for various lines of credit, and even if you do get approved the offer may come with higher interest rates and a lower limit than if you had good credit.
Credit scores aren’t only important when you’re trying to borrow money. Some employers run a credit check and if you have a poor credit score you may be less likely to receive that job. When moving into a new home or apartment, the landlord will also check your credit history, if you have a good credit score you are more likely to pay your rent on time and they are more likely to choose you as a tenant.
This is why you must build your credit, if this seems like a daunting task, don’t worry, we will be here every Tuesday giving you tips and tricks on how you can build your credit! Check out our website www.plastk.ca for more information.
Disclaimer: The content provided on the Plastk Financial Inc. Blog is information to help Canadians become financially literate and learn about credit. Plastk is not responsible for building or ruining an individual's credit score or credit rating. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment, credit inquiries, and all other decisions should be made, as appropriate, only with guidance from a qualified professional.