Why Credit Score Matters

The next time you apply for a store credit card or look into refinancing for your home, first ask yourself, “Is my credit score all it could be?” Of course, if you don’t really understand what a credit score is or why such a thing matters to begin with, then the earlier question will be moot. There’s no better time than the present to learn just why your credit score is so important.

Credit Scores, Defined

On a basic level, a credit score is like a report card. Each purchase you make on credit affects a 3-digit score set between 300 and 900. The higher your score goes over time, the better your financial reputation.

Ever heard of a FICO or Beacon report? These are just other names for your credit score. The bottom line is that any and all financial lenders base their decisions off of this all-important score. That makes it important for you to understand.

Any inquiry into your history—for any reason—creates a note on your credit report. Keep new credit applications at a minimum so you don’t unnecessarily impact your credit score this way.

Main Factors Influencing Your Score

  • Payment history. It makes sense that if you pay your bills on time, your ‘report card’ grades are better (i.e. your credit score goes up). Conversely, if you rarely pay on time, don’t expect your credit score to rise.
  • Credit history. Lenders feel good about extending loans to those who are good risks. If you have multiple on-time loans or past success with credit, you’ve been establishing a good credit history.
  • Outstanding debts. Any balances you carry that are 30 per cent of your total limit (or below) are acceptable debt amounts. However, if you regularly carry a balance in excess of 50 per cent, you’ll be viewed as an unacceptable risk by most lenders.
  • Number of recent inquiries. Did you know that each time your mortgagor updates re-financing paperwork, your credit history is accessed?

Getting a Copy of Your Credit Report

It’s surprising to note that most Canadians never request a copy of their credit report, even though it’s a simple process. You can request a copy for free through either of Canada’s main two credit bureaus, TransUnion Canada or Equifax Canada. (Warning: request only through these agencies- ignore all other “free credit report” links online, which are trying to sell you something).

If you fear that your credit score is permanently damaged, take heart. No bad credit score is forever. Also, remember that up to 30 per cent of credit reports have inaccurate information in them. Once you request your own copy, take note of inaccuracies and contact the bureaus to correct them. This simple step alone may boost your credit score.

For more tips on how to raise your credit score, contact the financial professionals at Exelby & Partners Ltd. We know how to put your financial difficulties behind you.


We care about your financial state, and we will do whatever we can to get you back to financial security, while minimizing your stress levels during a difficult time.