A credit bureau score is used by banks, or other companies - like cable providers, insurance companies or landlords - to determine how risky it is to do business with you. It gives them a picture of how well you manage your money because it's based on information pulled from all the lenders you do business with.
The better the credit score, the more attractive you are as a client. And this means you're more likely to qualify for that loan or mortgage you're applying for, or even to get a preferred rate or package from a cell phone company.
So how does it work exactly? Well the first time you borrow money, a credit rating report is created. They are maintained by credit reporting agencies and include whether you've paid your bills on time, whether you've missed payments, and what your outstanding debt is. Over time, this data will form a pattern of how well you pay - or don't pay - your debt. Information that appears on your credit rating is kept for 7 years.
This is why it is important that you pay all of your bills on time, even the ones that seem small and insignificant. And even if it is just the minimum payment. Regularly staying on top of your bills reflects a good pattern of behaviour.
If you often - or even sometimes - miss bill payments, this can negatively impact your credit score. And a lower score means you're less likely to qualify for financing down the road. If this is a concern, consider setting up automatic transfers on payday so you don't let a payment slip by.
Your credit score is your score. It is good to know what your current score is. You can request a copy of your credit report from either of the two agencies in Canada - Equifax or TransUnion. It's actually a good idea to review your credit report once in a while, in case of any errors or fraudulent activity.
If you keep on top of your credit information, and maintain good credit habits, you'll benefit in the long run.
Thanks to Gurnek, Credit Specialist at the RBC Advice Centre.
No comments:
Post a Comment