Knowing and improving your credit score and credit report is important so that you can get the lowest interest rates, have access to credit and protect against identity theft. Not only that, but some non-loan financial transactions, like insurance premiums, are impacted by your credit score.
To keep my credit report and credit score in good shape, I get them for free twice a year. If you haven’t had credit before, or have bad credit, checking your credit information will help you establish or rebuild your credit. You can see where you need improvement, and make efforts to boost your creditworthiness where necessary.
You should check your credit reports at least once a year. There are two reporting agencies you need to contact: Equifax Canada Inc. and TransUnion of Canada. Each company offers a free credit report, though it’s much easier to find the paid version. This makes sense since these agencies want to make money. Instead of going to the sites and trying to locate information about your free credit report, I’ve made it a little easier.
Last year I created a pdf with all the contact information and credit report request forms that you’ll need to get your free credit report. This is a great time saver, and you won’t accidentally pay for the privilege of looking at your credit information.
While it seems obvious that your credit report and credit score are used in making decisions about loans, there are other less obvious uses for your credit history. Others might use your credit information to make decisions about other financial services and products. Poor credit could lead to you paying hundreds, or even thousands, of dollars more over your lifetime.
Understanding your credit, and knowing your credit score, can help you learn more about what’s at stake, and help you improve your financial situation. However, it’s not always straightforward to get an idea of where you stand with your credit.
When it comes to checking your credit reports, it might be worth paying for your credit report to get your credit score. This is because, while you are entitled to a free credit report, you aren’t entitled to a free credit score. While your free credit report can give you an idea of what you look like financially, on paper, it’s not the same as seeing the credit score that lenders will use to determine whether or not they will approve your loan.
Your credit score is a quick look for others; they make snap judgments about your level of financial responsibility using your credit score. It might not be fair, but it is the reality of our financial system right now.
Once you have your credit report, you will want to find out your credit score. You do have to pay to get a credit score from Equifax or TransUnion. It doesn’t come free from the bureaus. However, if you aren’t planning to apply for credit anytime in the immediate future, you might not need your exact credit score to keep tabs on your general financial progress. If you’re not too worried about an exact number and would like to have a general idea of your credit score, there is a way to calculate this for free.
How to Calculate Your Free Credit Score
It’s actually fairly easy to see where you stand when it comes to your credit score. All you need to do is visit this credit score estimator and fill in the fields. Once you have done that, the calculator will tell you what range your score falls into. This can provide you with a starting point for improving your finances. If you are considered to have “Fair” credit, you can make it a goal to move up into the “Good” category. If you are in the “Good” category, knowing your estimated score can provide you with a starting point to take you into the “Excellent” category.
The score estimator works by asking you for information that indicates where you fall in terms of the factors that the official credit scoring algorithm works. Factors such as payment history, amount of debt you have, the types of accounts you have, how many credit inquiries are on your report, and the length of your credit history is weighted differently and used to come up with your credit score.
The calculator can’t be perfect since the exact scoring algorithm is proprietary. But using the information that has been made public about the way some of the factors are weighted, it’s possible to come pretty close. In fact, I found this calculator to be quite accurate when I compared the results with my own credit information.
I have three different reports that I’ve paid for to get my credit score over the last five years. Two were from Equifax and one was from TransUnion. I answered the questions using the information in these reports and not only did the calculator get the range right, all three times the score on the reports came within 10 points of the middle of the calculated range for that report. That’s not bad at all!
While you may have all the needed information handy and could check your score at any time, I recommend ordering your free credit reports and using that information with the calculator. You can order your free credit report, use the exact information provided by the report to ensure maximum accuracy, and then write the score the estimator gives you on the report for your records.
If you plan to apply for credit, it’s best to pay for your “official” credit score. However, if you are just keeping tabs on your financial progress, Bankrate’s free credit score estimator is a great resource that you can use for your own information.
Improve Your Credit Score
Once you know all this information, the next step is to look for ways to improve your credit score. There are many ways to improve your Canadian credit score, from paying your bills on time to keeping your debt balances low. For best results, you’ll want to keep both revolving and installment credit and continue building your credit history. Look at your credit report for indications of weakness. If you repeatedly pay late, you can see that you need to make greater efforts to pay on time and in full. When you see high credit card balances, it’s clear that you need to pay them down.
Use your free credit reports as a guide to help you make better choices, and then use your free credit score from the Bankrate calculator to track your progress. While it takes a little more effort than simply paying for your score online, getting a free credit score is a great way to save money and still stay on top of your credit information.