Canadians were working on their credit during the pandemic, and it shows. According to experts, missed payments fell by a third between the first quarters of 2020 and 2021, respectively. Even better, many Canadians have seen improved credit scores thanks to things like cautious spending and government relief measures.
Of course, if you’re just taking charge of your finances—whether to take out a loan or to manage old debts—you might be wondering what this means. After all, what are the benefits of having good credit, and why should you work on improving your score?
From saving money to helping you get your dream home, the right credit score can work wonders. Let’s take a look at what it means to have a good score and what advantages it can earn you.
What Is a Good Credit Score?
Canada’s two major credit agencies, Equifax and TransUnion, are responsible for calculating your credit score.
The reporting scale ranges from 300 to 900, but experts consider a “good” score to be anywhere from 670 to 739, while scores from 740 to 799 are “very good.” Scores of 800 and above fall into the exclusive “excellent” range, earning you more trust and rewards.
It’s important to keep in mind that your credit score is different from your credit report. While your credit report details your entire credit history, your credit score boils everything down to a single figure that represents how much risk lenders are taking. Lenders are more likely to work with borrowers who have higher credit scores, which indicate lower risk.
Keep in mind that having a low score doesn’t mean that you won’t be able to borrow money! Instead, it only means that you may not be able to work with all lenders. It’s still possible to get bad credit loans, for example, as these options don’t take your credit score into account.
Of course, good credit is important for much more than loans, as we’ll talk about below.
How Do You Check Your Credit Score?
Before we dive in, it’s a good idea to check your own credit score, if you haven’t already. You should get your hands on both your credit report and credit score on a regular basis to check for accuracy.
Both Equifax and TransUnion allow you to check your credit score online. Though you can get this information from paid services, we recommend checking with these credit bureaus directly. Equifax’s services are free for all users, though TransUnion only allows those in Quebec to check their scores for free.
Financial Benefits of Having Good Credit
Most of the major benefits of a good credit score are financial. Having a higher score gives you great negotiating power on everything from loans to credit limits and more.
Getting Good Loan Terms
As we’ve hinted above, having better credit makes you more likely to get better terms for almost any loan. You’re more likely to pay higher interest rates—thus repaying much more money over the life of your loan—if you have a low score. In other words, the right score could save you hundreds or thousands, depending on the loan amount.
Better Credit Cards
It’s not hard to take out a new credit card these days, even with low credit, but the best credit cards are reserved for a trustworthy few.
Certain credit card rewards can offer bonuses and freebies that are worth hundreds of dollars. From cash back on select purchases to free hotel stays and airfare, these benefits can be a great way to get perks from things you’d be buying anyway.
Of course, credit card companies only offer these cards to users with great credit scores, with the best reward cards going only to those with “excellent” credit.
Higher Credit Limits
In general, higher credit scores equal higher credit limits as well. Though you may need to call your credit card issuer to negotiate, pointing to a higher score can sometimes get you approved for a credit increase.
Lower Car Insurance Rates
If you have a high credit score, partnering with the right company can net you more affordable rates and premiums. Though the discount may vary, it can be a huge help if you live in an area with higher premiums.
This varies from province to province: in some areas, auto insurance carriers aren’t allowed to access your credit rating at all.
Property Benefits of Having Good Credit
If you’re hoping to make a significant lifestyle purchase, you’ll want to have good credit as well. Lenders and rental companies are more likely to work with you if your score shows you to be trustworthy.
Buying a Home
Looking to buy a new home? Having a higher credit score can be a great way to save hundreds or even thousands of dollars in the long term.
Mortgage lenders use your credit score to see how much risk they’re taking by loaning you enough to buy your home. If your credit is good, they’re more likely to approve, with larger loans for the highest scores.
People with better credit scores are also more likely to get better interest rates on their mortgage. Though this may be as small as a 1-2% difference, it can translate to huge savings over the loan term.
Buying a Car
Car loans function in much the same way as a mortgage: a higher credit score indicates less risk to your lender. For most car loans, you’ll need a credit score of at least 630, though you can get a high-interest loan with lower scores.
Getting an Apartment
Landlords and rental companies won’t know much about you aside from what you list on your rental application, but they’ll often do their homework to be safe. This includes background checks and credit checks with each application.
Renters with high credit scores are more likely to pay their rent on time, whereas renters with lower scores are more of a risk. Having a higher score, then, means you’re more likely to land the apartment of your dreams instead of getting a rejected application.
Getting a Phone
These days, most of us buy our phones using a phone contract with a major carrier. Just like the loans and items above, these contracts can be risky for the lender if they offer one to the wrong borrower. Customers with low scores may make a carrier less likely to offer you a contract.
Other Benefits of Having Good Credit
Last, but not least, there are a few additional benefits to having good credit:
Getting a Job
Though this isn’t the case with all jobs, some employers will check your credit score before hiring you.
Even though you aren’t borrowing money from your employer, your credit score indicates how much you can be trusted to follow through on your word. Higher scores may indicate better finances and stronger organizational skills, while lower scores might hint that you’ve made poor financial decisions in the past.
If there’s one thing utility companies dislike, it’s customers who can’t pay their bills. With a lower credit score indicating high risk, a utility company may not let you sign a contract without putting down a security deposit.
How to Rebuild Your Credit
If you have a low credit score, many of the financial and property benefits above may be out of your reach—for now.
Improving your finances can help you boost your score little by little, though this can take time. Here are a few tips for raising your credit score:
Pay Your Bills on Time
Past missed payments can have a negative effect on your credit score, especially if you have a long history of them. To improve your score, make sure to pay on time, every time. Consider setting up automatic withdrawals to help.
Take Out Only What You Need
Instead of applying for multiple credit accounts, apply for just what you need. Applying for multiple accounts at once can put a dent in your credit score, as it suggests you might be trying to live beyond your means.
Stay Under Your Credit Limit
Using less of your available credit can show that you’re a responsible borrower. Try to use no more than 35% of your available credit at any time.
Check for an Accurate Credit Report
As we’ve stated above, your credit score is a simplified figure based on the information in your credit report. If there are mistakes in your credit report, it could affect your credit score.
Be sure to get a free copy of your credit report and check it for any inaccuracies. If you notice anything wrong, contact the credit reporting bureau to report it.
Work With Us Regardless of Credit
Not everyone can manage good credit all the time. Real life can sometimes throw a wrench into your plans, making it hard to recover after your credit score has taken a hit.
Whether you have an outstanding credit score or you’re working to improve it, our services can help. Even if you can’t yet access the benefits of having good credit we’ve mentioned above, a bad credit loan from 24Cash is an easy way to get the money you need fast. Request a loan today from your own home.