WHAT IS MY CREDIT SCORE AND WHY DO I CARE ABOUT IT?
Your “credit score” ranges from 300 to 900. It is used to evaluate your creditworthiness.
For example, credit card companies, banks, landlords and other lenders may use your score to determine the risk factor when loaning you money, renting you a property or deciding on the amount of credit to give you.
Your credit score is calculated using a formula based on your credit report.
These reports are created by credit bureaus— namely, Equifax and TransUnion.
They collect, store and share information about how you use credit.
Your credit score will change over time with your actions and assets.
Your credit history follows you everywhere, unfortunately.
Each time you pay a bill, take out a loan or open a card or account, it is likely to impact your credit report.
What’s more, if you miss a payment, or default on a loan, or max out an account, it will likely circle back to you and be traced to your credit score, negatively.
Most of us fail to realize our credit scores may have been negatively impacted.
It can be a pernicious, insipid process.
Usually each lender has its own minimum credit score that is required to lend, meaning that if your credit score is too low, you might not be approved.
However, if your credit history is adequate, you may be able to get a lower interest rate on loans, which can save you a lot of money over time.
Credit reports are also important when looking for signs of identity theft or fraud.
At least once a year, you should check to make sure someone has not tried to open credit cards or other loans in your name.
WHAT DO I AVOID TO KEEP GOOD CREDIT?
You get credit points for keeping up to date on your obligations. You get negative points for failing to do so.
Avoid these things:
- regularly missing or getting behind on payments
- reaching or going over your credit limit
- bankruptcy and consumer proposals
- debts sent to a collection agency
- the amount of your outstanding debts – keep it reasonable
HOW DO I FIX MY CREDIT SCORE?
The best way is to contact a credit counselor, who could guide you on the best steps to take.