Your credit rating: Debunking the myths

Monday November 6th, 2017

Your credit rating: Debunking the myths

Your credit rating, also known as your credit score, is a number assigned by credit bureaus based on your debt payment habits. The lower your score, the more risky it is for lenders to loan you money. The higher your score, the less risky it is. Unfortunately, there’s a lot of misinformation surrounding credit scores, but we’re going to set the record straight once and for all!


MYTH #1: If you shop around for the best mortgage rate, your credit score will be affected.

The reality: You can’t be penalized for shopping around. Credit scores only contain features for identifying patterns.


MYTH #2: You have to pay off your credit cards in full, otherwise you’ll be penalized.

The reality: The biggest rule of thumb is to only use one or two credit cards. Also, the amount of credit used shouldn’t exceed 35% of your overall credit limit.


MYTH #3: If you don’t use your credit card, your credit score can’t go down.

The reality: Your credit score depends on your credit behaviour. Not using your credit card doesn’t show that you’re capable of using it responsibly.


MYTH #4: Having an NSF cheque 7 years ago is no big deal. It doesn’t stay on your record.

The reality: Information can stay in your credit file for years. Paying your mobil phone bill late, having an NSF cheque, exceeding your credit card limit...all of that stays on your record. Fortunately, managing your finances responsibly and paying your bills on time will help you bring your score back up over time.


MYTH #5: If you close a credit account, your credit score will be affected.

The reality: The opposite is actually true. When you close out old accounts, you lower your available credit, which increases your credit score.


MYTH #6: Requesting your credit report will have a negative impact on your score.

The reality: That depends. Lenders, landlords, credit card companies and car dealers all check your credit score before they’ll do business with you. So if you buy a new car, move to a new apartment and apply for a new credit card all within a few months, yes, your credit score will go down. However, if you request a copy of your own report, your score won’t be affected at all.

It’s actually a good idea to check your credit report once a year so you can monitor your expenses and make sure the information is accurate. You can request your credit report by contacting a credit bureau like Equifax or Transunion.

It pays to know the facts about your credit score!

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