Understanding How To Maintain Your Credit Score

Date Posted: March 4, 2021

From Mortagebrokerscity.com

According to Borrowell, a popular credit-monitoring service, the average credit score in Canada is continuously on the rise. According to their latest report, the average credit score of Canadians in 2019 was 648, up 4 points from the previous year. However, 648 falls into the category of a ‘low’ credit score. A large part of increasing your credit score is understanding how to maintain it. 

There are two major credit reporting agencies in Canada; Equifax and TransUnion. Credit scores are used by lenders to establish the level of risk they would be taking in lending you money. The reporting agencies use a statistical formula that translates into a three-digit score between 300 and 900 – the higher the score, the more ‘trust-worthy’ you are seen from the lender’s point-of-view. Lenders have different criteria in determining whether they will lend to you, aside from your score. Income type, assets and liabilities also play a significant factor in their decision.

The length of time you have had active credit, payment history, current debts and amount of recent inquiries all play into your credit score. Increasing your score is a slow and steady process, and a financial mistake – such as missing a payment, could quickly drop the score. Here are some quick tips on how to maintain and increase your score:

• Always try to pay your bills in full and on time. You are expected to make the minimum payment every month, however this usually will not reduce your overall balance and carrying it over time without reducing it can cause a drop in score.
• Avoid going over the limit on any available credit such as credit cards, lines of credit, etc. 
• Reduce the number of loan applications you make as frequent credit history searches can also lower your score.

For more information on controlling your credit, visit our ‘Questions About Credit’ article by clicking here. To view the average credit score for each major Canadian city, click here to read the article on the Financial Post website.