Credit Score - Why it is important

[Woofy]

I was reading through the ways to save money thread, and thought about how we missed out credit scores and credit reports!

Credit scores and reports are such a big part of our lives, and I strongly believe that learning about it, and knowing how to manage your credit score is going to help us save a tonne of money in our lifetime!

So, I am starting this thread to talk about credit scores.

First, what is a credit score?

A credit score is mathematically calculated by all the information found in your credit report, and translated into a 3-digit number between 300 to 900, and lenders use this number to gauge your credit history.

An average credit score is around 650, and a score of 520 is generally required to qualify for a mortgage.

Why is credit score important?

Think of the credit score as a report card on how you are doing financially in your life. J

All lenders based their decision on whether to extend credit to you on your credit score. All lenders, from your bank, to your car dealership, to your department stores credit application to your landlord, they all rely on credit scores to help them access whether you as a credit applicant will be reliable in making your payments, and if it is worthwhile for them to take on the risk of lending you money.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p> </o:p>
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<o:p></o:p>And most importantly, the higher your credit score, the better chance of you negotiating for the best rates you can get from a lender. I think this is where you will find that you will get the most savings over the course of your lifetime financial activities.

Consider this simple example:

For a $100,000 mortgage at 5% interest rate, paid over 25 years, you will be paying $75,377.01 in total interest to the lender over a span of 25 years.

For a $100,000 mortgage at 3.25% interest rate, paid over 25 years, you will be paying $46,194.87 in total interest to the lender over a span of 25 years.

That’s a savings of $29,182.14 over 25 years, which translates to $1,167 a year!

I’m not sure if you think that is much, but for me, I’d much prefer to have that $1,167 in my own pocket, than in the pockets of my lenders!

So, hopefully, I have managed to convince you that your credit score and report is a very important financial tool that you should learn to manage. J

I will write about ways to improve our financial report card in a future post.<o:p></o:p>
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[VeeVee]

Thanks Woofy, this comes in handy bc BF and I are looking to purchase and I had no clue about what credit score was generally wanted to get a mortgage!
Great info!!

[Natalka]

You can get a free copy of your credit score at Equifax, or the bank officer can get it while you are in a meeting with him/her.

[NancyM]

thanks woofy alot of this info is very helpful

[JumboShrimp]

Great post, Woofy! Yes, your credit score is very important. I check mine every year.

By the way, the free credit report that you can obtain from equifax, transunion, and that other one (can't remember the name right now) does not include your FICO score, which is the 3-digit number that Woofy mentioned in her post. To get your FICO score, you have to purchase the Score Power thing from Equifax.

[orv]

is it true that checking your credit score.. and applying for credits cards lower it???(i heard this somewhere not sure if its true? and when it comes to finance its like chinese to me... lol)

[Justine]

I've never checked my credit score, are there any good websites that you can check it out on?

[Woofy]

is it true that checking your credit score.. and applying for credits cards lower it???(i heard this somewhere not sure if its true? and when it comes to finance its like chinese to me... lol)

When you check your own credit score, it doesn't affect the score, as the file will indicate that the credit report was requested by owner.

And yes, when you first apply for credit cards, I believe your score will take a slight hit.

I read somewhere that the hit is something like 50 points, and it takes about 6 months to get back to your original score. (Not proven, just hearsay!)

The 50 point hit can be significant if your credit score is not the greatest. But for people with good credit score, this has minimal impact.

That is one of the reason why you shouldn't apply for too many loans at the same time. And if you are about to renew your mortgage, try not to apply for any loans (like car loans or credit cards) 6 months before your mortgage renewal.

Again, keeping your credit score high while negotiating your mortgage rate will give you the power to negotiate!

[orv]

gosh im doomed.. i dont even want to know my score then... lol i no its AWFUL

[Woofy]

I've never checked my credit score, are there any good websites that you can check it out on?

Your best bet is: https://www.econsumer.equifax.ca/ca/main?lang=en

If you want the score, you will have to pay $23.95 for the Score Power report.

Don't order the $15.50 report, as it doesn't contain your credit score.

The $15.50 report is basically an immediate online version of your credit report, that you can order for free if you call them or fax them a request.

[Woofy]

. Duplicate post.

[Woofy]

gosh im doomed.. i dont even want to know my score then... lol i no its AWFUL

Never too late to reverse it!

It takes time and patience, but it is worth it!

[kayoko]

Do you think you could do a post on how to get credit scores? The differences between the versions? I know there's a couple of them, but I'm almost going in blind here so a little hand-holding would be nice. No pressure though!

[Zonny]

Do you think you could do a post on how to get credit scores? The differences between the versions? I know there's a couple of them, but I'm almost going in blind here so a little hand-holding would be nice. No pressure though!

I think that it varies from province to province. Here in NS, I don't think you can even get it online.

Z

[clarebear]

How about ways to improve your credit?