5 Myths Canadians Should Know About Their Credit Score
Let’s destroy the myths!
When it comes to improving your credit score, knowledge is power. Here are 5 myths we bust to help you get the most from your credit score.
5 Myths Canadians Should Know About Their Credit Score
Credit scores are terribly shrouded in mystery for something so important. In finance, we don’t like ambiguity!
Myth 1: Checking your score hurts
Checking your credit score doesn’t hurt. But we know why so many Canadians think so.
When you apply for a loan, lenders do what is called a “thorough investigation” of your credit report to see if they see you as a trustworthy borrower. But these difficult inquiries will take a few points off your credit score.
Usually, the damage you suffer is easy to repair with good credit hygiene over the next few months.
Checking your own score, on the other hand, usually involves a “soft survey”. These surveys do not hurt your score at all. You can request a credit report from one or both of the credit bureaus, TransUnion or Equifax, or use another old fintech app called Mogo to check your Equifax credit score.
Myth 2: you only have one score
Double the scores, double the joy! I laugh. Double the work!
TransUnion and Equifax are Canada’s two credit bureaus. They can use different scoring models, and not all lenders report or refer to both. So, when looking to get a feel for your credit score, it’s important to check with both.
Likewise, when you do your annual credit report check for fraudulent or incorrect information (you don’t do it every year? Well… you do it now! Right?) You will need to ask for your reports. at both offices.
Myth 3: Having a balance is good for your score
There is a myth that having a small balance on your card is good for your score. Add a little, pay a little, rinse and repeat until you die. But this is not true !
When you carry a balance, you are charged interest. Making minimum payments or not paying off that balance in full could cost you thousands of interest over time.
What is really good for your score? Maintain a low rate of credit usage and pay off your balance in full on time.
Myth 4: Closing a card is good for your score
So you’ve finally paid off your debt! Now the icing on the cake: shut down that pesky map that got you in trouble in the first place.
Sigh. Not so fast.
When you close a credit card, your score is likely to take a hit. This is because you are changing your rate of use of credit. What is that? If you have a limit of $ 1,000 and you have $ 500 in debt, you are using up 50% of your available credit. You have a 50% utilization rate.
Lenders want you to keep your utilization rate at or (ideally) below 35%.
Your use takes into account all available credits on all of your loans and credit cards. When you close a credit card, it decreases your total available credit and skews your usage rate.
As a result, your credit score can take a hit. So, when closing a credit card, consider your usage.
And knowing that your score can take a hit when closing a card, be careful closing cards if you are in the process of applying for another loan or mortgage that will reflect your credit score.
Myth 5: You should be ashamed of a bad score
Got a bad score?
We’re going to tell you a not-so-secret secret: you don’t have to be ashamed. Yes, having a bad credit rating is not ideal, but Canadians end up with bad ratings for all kinds of reasons. It doesn’t make you a bad person, and it doesn’t mean you can’t take action to bring your score back to optimal health.
So don’t be ashamed if your score is a little worse for wear. Stop saying “my credit score sucks” and start saying “I’m focusing on improving my credit score!” Doesn’t that sound better?
Help control your credit score with Mogo
Need a hand in monitoring your credit rating? We have what you need. Sign up for a MogoAccount and get free monthly credit score monitoring for 90 days. Want more? Get free monthly credit score monitoring as long as you have a Mogo Visa * Platinum prepaid card.1
Our money management app is here to help keep your spending on track and your credit score in top shape.
You know what they say: knowledge is power! Start getting your score on track today with Mogo.
This blog is provided for informational purposes only.
* Trademark of Visa International Service Association and used under license by Peoples Trust Company. The Mogo Visa Platinum Prepaid Card is issued by Peoples Trust Company under license from Visa Int. and is subject to terms and conditions, visit mogo.ca for full details. Your MogoCard balance is not insured by the Canada Deposit Insurance Corporation (CDIC). MogoCard means the Mogo Visa Platinum prepaid card.
1 – Free credit score is provided by Equifax and is only available to MogoAccount holders who have passed identity verification. The Equifax credit score is based on Equifax’s proprietary model and may not be the same score used by third parties to assess your creditworthiness. The provision of this score is intended for your own educational use. Third parties will consider other information in addition to a credit score when assessing your creditworthiness. Equifax® is a registered trademark of Equifax Canada Co., used here under license. MogoProtect identity fraud protection and credit score monitoring are available free of charge to all eligible MogoMember members for 90 days from initial MogoAccount registration. MogoCard holders will be entitled to receive MogoProtect identity fraud protection and credit rating monitoring free of charge as long as they remain active MogoCard holders. If you do not fund your card within 60 days of ordering or if you do not make a transaction on your MogoCard for more than 90 days, you will not be considered “active” and you will be excluded from MogoProtect and the credit score.
Mogo inc. published this content on 22 October 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on 22 October 2021 06:53:01 PM UTC.