We have all heard people say things like “make your money work hard for you”. But how do you achieve that? Something that is often left out of conversations, as well as education, is building your credit. Your credit will become your leverage when it comes to purchasing large items in life.

Just the word credit can sometimes make people cringe which is mainly because it is usually associated with debt. Stats claim that 71% of Canadian families carry some form of debt which is commonly seen as something to avoid, or a form of something evil that lacks benefits. Credit is key to being able to get a job, purchase a new car or buy a home and much more. 

Lets Talk About The Basics

Credit scores in Canada have a scale from 300 to 900. The two companies involved in tracking your credit score is TransUnion and Equifax which base your score on the data within your credit report. There are 5 aspects they review when calculating your credit score: payment history, debt owed, credit account history, new credit, and types of credit. Your overall credit score provides lenders a quick look at your risk level as a borrower.

The higher you keep your score the less risky the lender sees you. Good credit will determine what rate and term the lender will offer you when applying for a mortgage or any kind of loan.  Lenders are excited to do business with someone who presents as a good investment. 

What Do The Numbers Mean?

760-900: Excellent credit. If you fall into this category, you are in great shape and the lenders will be happy to work with you and offer you some of their best financing options. 

725-759: Very good credit. This is still a very acceptable range to be in and you will still be offered competitive rates and terms.

660-724: Good. You’re doing decently but the lowest rates may not be something offered to you quite yet. You need to improve your credit health by being patient and diligent with your credit amounts and payments. 

560-659: Fair. Higher rates are inevitable when you fall into this range. It would be best to pay out some debts by making extra or larger payments and to be strict when making payments on time and you will see your credit start to improve.

300-559: Poor. You may have just started on your credit journey or encountered some setbacks.  Nothing is permanent, you can improve with a plan and determination. Once you implement a strategic plan you would be surprised how quickly your score will start to climb. Contact your mortgage expert to help you draw up a fail-proof plan of action.

Ordering your credit report from Equifax or TransUnion is always a fantastic place to start.

Things To Avoid

• Late or missed payments

• To many revolving accounts

• Closing an old account with long history

• High credit usage and loan balances

• To many new credit applications

Understanding and controlling your credit score is one of the main objectives when it comes to borrowing power and financial freedom. Without it your chances of home ownership, loan approvals, or financing of any kind decrease substantially. There are many ways to impact your credit score in a positive way. If you want to know the ins and outs of credit management give us your time and questions and we will have you on the path to success in no time at all. Helping people reach their goals is why we do what we do. Talk soon!