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Understanding your credit score: Global Morning News


Good credit is important for your financial health, but the problem is not a lot of people really understand how credit scores work. For more on that we are joined by Matt Atkinson.

What is a credit score overall?

A credit score is a 3 digit number that indicates to potential lenders how responsible you’ve been with your financial decisions in the past. Really, basically–do you pay off your debts on time? Credit scores are used by lenders and creditors as one factor when deciding whether or not to offer you credit, such as a loan, a credit card, or a mortgage, your credit score is calculated using multiple factors including: your credit history, the length of your credit history, and your total overall debts. A really high credit score you’ve made responsible and consistent financial decisions in the past. This gives creditors more confidence when considering your request. If your credit score is high, you generally have a greater chance of being approved and receiving more favourable credit terms

What would a high credit score be? What would a low credit score be?

In Canada credit scores range from 300 to 900 (with 300 being the low end and 900 being the highest). Something from 300 – 579 is considered poor, 580 to 669 is considered fair, 670 – 739 is considered good, 740 – 799 is considered very good, and then anything over 800 is considered excellent.

What are some of the side effects to having bad credit?

Unfortunately a low credit score can really impact a persons financial well-being–not only in the present, but the future as well. A bad credit score has several impacts including your ability to get into the housing market, employment, access to credit, and once you get access to credit you generally have higher interest rates. So for example, a low credit score can delay a person’s ability to enter the housing market and hinder their dream of homeownership. Many people don’t actually realize that even if you’re renting, part of the rental application process now that landlords ask for is a credit review. So credit does have an impact on both entries to the housing market: renting and owning. Bad credit can also lead to obstructed access to new credit products. If you face an emergency in the future, it could be challenging to get lending facilities to help you in those emergencies.

How can young people ensure that their credit stays healthy?

It’s not to say, don’t get a credit card–as a credit card can be a very useful tool. But you need to be cautious about making the right type of purchases, and ensuring you have enough money to pay off the total balance of the credit card. So that’s a very simple way to ensure you’re keeping your credit score healthy, for younger people as they’re building more credit as they get older with things like car loans and lines of credit and then hopefully like you were saying, get into the housing market.

What’s the biggest mistake someone can make when it comes to credit?

The simplest answer to making sure you don’t make a mistake is to ensure you’re paying your debts off in full, consistently, and as quickly as you can. Make sure you’re paying your bills on time, and if you’re having trouble paying those bills really sit down with someone from your financial institution and ask for help. They can look for ways to consolidate your debt, get them to lower potential interest rates than what you have on some of your credit cards, and stay on top of your credit score by checking it regularly. Despite common misconceptions, you can actually order your own credit report and that will have no negative impact on your credit score. You can request a free copy through Equifax or Transunion Canada.


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This article is provided for general information purposes only. It is not to be relied upon as financial, tax, or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, fees, and other investment factors are subject to change without notice and Cost Capital Savings Federal Credit Union is not responsible to update this information. All third party sources are believed to be accurate and reliable as of the date of publication and Coast Capital Savings Federal Credit Union does not guarantee accuracy or reliability of such sources. Readers should consult their own professional advisor for specific financial, investment, and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.

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