Did you know that checking your credit score on a regular basis is an excellent proactive measure that you can take in maintaining your financial health? You can monitor activity and identify and correct discrepancies before too much time elapses. However, it’s not just enough to take a look now and then. You’ve got to understand what you are looking at.
A recent report from TransUnion shows that most consumers don’t really know how their credit score is tabulated, even though they check it on a regular basis.
Highlights from the survey include:
- Fifty-eight per cent of respondents believed that salary impacts your credit score
- Fifty-six per cent said that employment history is reflected in your credit score
- A significant number (54 and 33 per cent respectively) believe that getting a raise at work or boosting savings figures into their credit score
“While it is commendable to keep tabs on your credit, it is important that you understand how your credit score is calculated. Unfortunately, many people don’t give too much thought to the mechanics of credit until they are applying for credit and they are denied, or they are subject to higher interest rates as part of the conditions of the loan or card,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“If your credit history (including your credit score) reveals that you’ve got room for improvement, you’ve got to understand how to get there,” says Schwartz.
Here are some quick facts you need to know about your credit score.
Better late than never?
The biggest influencer on your score is your repayment history. And don’t be fooled. You may think that it’s ok to be late on your payments here and there and eventually pay them. Not so. Late payments will drag your score down. If you want to elevate your credit score, make it a priority to pay your payments on time in full.
Too much debt already
One of the other major factors in your score is if you’ve already got too much debt. This can include loans and credit cards.
If you want to boost your score, keep your debts low in comparison to your limits.
Check it the right way
Inquiring about your credit score won’t negatively impact the numbers, but if you actually go through a number of “hard” inquiries (i.e. applying for multiple cards/loans in a short period of time) your score will be reduced. It appears that you are shopping around for credit.
If you are looking to apply for something, plan your application process ahead of time and limit it to a couple of lenders.
Look at the whole picture
According to the TransUnion survey, people were confusing a number of factors that they felt were necessary in achieving a good credit score with other criteria that you also need in place to qualify for a loan/card (good savings habits, stability in employment and salary). Just because these don’t directly impact your credit score itself, they most certainly are important in your ability to qualify for credit.
To break it down, your credit score is a starting off point in qualifying for credit, but a lender will certainly consider those other factors when deciding whether or not to grant a credit product, or what interest rate they will give you, so keep up those good habits.
Are you trying to restore your credit to optimum health? Part of getting back on your feet is understanding the steps you need to take to get there. Call one of our trained credit counsellors at 1-888-294-3130 or visit our free online debt analysis.