Do you have Credit Curiosity?

Here is some helpful information!

Highlights:

  • Credit reports usually do not contain credit scores

  • There are many different credit scores and credit scoring models

  • You can purchase credit scores from a credit bureau or get one free from some banks and credit unions

Many people think if you check your credit reports from the two nationwide credit bureaus, you’ll see credit scores as well. But that’s not the case: credit reports do not usually contain credit scores. Before we talk about where you can check your credit scores, there are a few things to know about credit scores, themselves.

One of the first things to know is that you don’t have only one credit score; there are many different scores used by lenders and other organizations. Credit scores are designed to represent your credit risk, or the likelihood you will pay your bills on time. 

Credit scores are calculated based on a method using the content of your credit reports. The credit scores available to you are often called “educational scores”; that means it’s provided to you for your own education, but isn’t necessarily the same scores being used by lenders.

Score providers, such as the credit bureaus Equifax and TransUnion along with companies like FICO, use different types of credit scoring models and may use different information to calculate credit scores. Credit scores provided by the two nationwide credit bureaus may also vary because some lenders may report information to both, one or none at all.  And lenders and creditors may use additional information, other than credit scores, to decide whether to grant you credit. 

So how can you check your credit scores? Here are a few ways:

  • Purchase credit scores from a Canadian credit bureau. Both Equifax and TransUnion provide credit scores for a fee. Credit scores can be purchased online, in person or by mail. The credit score provided by each credit bureau is the bureau’s proprietary score.

  • Your bank or credit union. Some banks and credit unions offer credit scores free for customers through online banking sites and/or mobile apps. However, the credit score a bank or credit union shows its customers may not be the same score the bank or credit union uses to make lending or other decisions. If you obtain a credit score through a bank or credit union, it usually indicates which credit bureau or company has provided the score. 

  • Other sources. Depending on where in Canada you live, you may be able to use a free credit scoring site. Some other organizations offer free credit scores to people who sign up for their services and receive a no-obligation credit card or loan offer.

    In addition to checking your credit scores, it’s a good idea to regularly check your credit reports to ensure that the information is accurate and complete.

    You can request a free copy of your credit reports by contacting Equifax  or TransUnion.

What is a Good Credit Score?

  • Credit scores are calculated using information in your credit report

  • Credit scores from 660 to 900 are generally considered good, very good, or excellent

  • There’s no “magic number” to reach when it comes to receiving better loan rates and terms

It’s an age-old question we get, and to answer it requires that we start with the basics: What is a credit score, anyway?

A credit score is a number, generally between 300 and 900, that helps determine your creditworthiness. Credit scores are calculated using information in your credit report, including your payment history; the amount of debt you have; and the length of your credit history.

Credit scores are intended to help lenders, creditors and others make fair decisions on whether or not to “take a risk” on someone. The risk might involve giving that person a loan (will they repay it?), offering a credit card (will they make timely payments?) or approving their apartment rental application (will they pay their rent?).

While your credit score is important, it is only one of several pieces of information an organization will typically use to determine your creditworthiness.

It’s also important to remember that everyone’s financial and credit situation is different, and there’s no “magic number” to reach when it comes to receiving better loan rates and terms.

There are many different credit score models used today by lenders and other organizations. These scores all have the same goal: to predict a consumer’s likelihood to pay their bills. There are some differences around how the various data elements on a credit report factor into the score calculations.

Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent. Higher credit scores mean you have demonstrated responsible credit behaviour in the past, which may make potential lenders and creditors more confident about your ability to repay a debt when evaluating your request for credit.

Lenders generally see those with credit scores 660 and up as acceptable or lower-risk borrowers. Those with credit scores below 660 could be more challenging however at MMG Mortgages we do still have plenty of options for financing. Remember, that a credit score itself is not the only factor that will dictate an approval.

How Do Your Actions Impact Credit Scores?

Here are some tried and true things to keep top of mind as you begin to establish – or maintain – good credit:

  • Pay your bills on time, every time. This doesn’t just include credit cards – late or missed payments on other accounts, such as cell phones, may be reported to the credit bureaus, which may impact your credit scores. If you’re having trouble paying a bill, contact the lender immediately. Don’t skip payments, even if you’re disputing a bill.

  • Keep your credit card balance well below the limit. A higher balance compared to your credit limit may impact your credit score.

  • Apply for credit sparingly. Applying for multiple credit accounts within a short time period may impact your credit score.

  • Check your credit reports regularly. Request a free copy of your credit report and check it to make sure your personal information is correct and there is no inaccurate or incomplete account information. If you find information you believe is inaccurate or incomplete, contact the lender or creditor. You can also file a dispute with the credit bureau that provided the report. Remember: checking your own credit report or credit score won’t affect your credit scores.