How Your Credit Score Impacts You

Your credit score plays a critical role in your overall financial health by reflecting your creditworthiness. In simple terms, it influences how much money you can borrow, the interest rates offered, and the fees you’ll pay.

A credit score is calculated based on your credit report, which includes:

• Payment history
• Outstanding debt
• Length of credit history
• Types of credit accounts
• Frequency of credit applications

In both Canada and the U.S., most lenders rely on the FICO score system, which ranges from 300 to 900. The higher your score, the more likely you are to be approved for credit and receive favorable terms.

• High Score (750+): Increases eligibility for mortgages with low interest rates and smaller down payments, ultimately saving you thousands over time.
• Low Score (below 600): Makes securing a mortgage more difficult. Lenders may require a higher down payment and charge higher interest, which increases monthly costs and overall borrowing expenses.

Key Factors That Influence Your Credit Score

1. Loan Defaults Defaulting on a loan severely damages your score and remains on your report for up to seven years. It signals high risk to lenders and limits future borrowing opportunities.
2. Late or Missed Payments Payment history is the single most important factor. Even one late payment can have a significant impact. The longer the delay, the greater the negative effect.
3. Credit Utilization This is the ratio of your outstanding balances to your available credit. High utilization suggests financial strain. Aim to keep this ratio below 30% to maintain a strong score.
4. Credit Applications Each new credit application creates a hard inquiry on your report. Too many inquiries in a short period can reduce your score and suggest financial instability.
5. Credit Accounts Closing long-standing accounts can shorten your credit history and reduce your score. Lenders prefer borrowers with established, well-managed credit histories.

Maintaining a Healthy Credit Score

• Pay all bills on time, every time.
• Keep balances below 30% of your credit limit.
• Avoid unnecessary credit applications.
• Apply for affordable credit products that match your profile.
• Review your credit report regularly and dispute errors.
• Build a long credit history—consider a secured credit card if you’re just starting.

Steps to Rebuild or Improve Your Credit Score

1. Review Your Credit Report Request a free copy from Equifax or TransUnion. Carefully check for errors and dispute inaccuracies that may be dragging down your score.
2. Reduce Outstanding Debt High debt levels reduce borrowing capacity and increase risk. Paying down balances improves your credit utilization ratio and strengthens your score.
3. Create and Stick to a Budget Prioritize timely bill payments by planning your monthly expenses. Use a budgeting app or a simple spreadsheet to stay organized.
4. Seek Professional Guidance If debt feels overwhelming, consult a credit counselor or financial advisor. They can help you design a strategy for managing debt, rebuilding your score, and improving financial stability.

✅ Bottom Line: A strong credit score not only helps you qualify for loans but also ensures better borrowing terms—saving you money and giving you greater financial freedom.