Your credit score is the key piece of information lenders look at when deciding to approve a loan and lend you money. The higher your credit score, the better your creditworthiness, meaning lenders are more likely to see you as a reliable borrower.
Do you know your credit score? If you check your credit score regularly, you’ll be more informed and better equipped to improve your credit standing. We’ve outlined five reasons why you should check your credit score regularly so you can start rebuilding your credit.
Why should you check your credit score regularly?
1. It’s easy
With our world going digital, it’s easier than ever to access your credit information. So what kind of credit information is out there? There’s your credit report and your credit score:
- Your credit report documents your borrowing history including active loans, payments, credit limit and how much you still owe on each of your loans. Your credit activity, which is found on your credit report, impacts your credit score.
- Your credit score is a three-digit number between 300 and 900 that represents your credit risk. Your credit risk is the likelihood that you’ll pay your bills on time, or pay back a loan on the terms agreed upon. The higher your credit score, the lower your lending risk, which means more lenders will want to approve you for new credit.
You are entitled to receive one free credit report each year from the two Canadian credit bureaus: Equifax and TransUnion. Your credit report doesn’t contain your credit score, however, you can access your score online instantly with a one-time fee. It’s as easy as the click of a button. You can also read our blog post How to Check Your Credit Score 101 for more information.
2. Checking your credit score won’t lower it
Many people think checking their credit score will lower it but this isn’t the case in every situation.
There are two types of credit inquiries:
- Soft inquiry. When you request a copy of your own credit report or credit score, this is considered a “soft inquiry” and it won’t impact your credit score. Lenders may also complete soft inquiries if they’re doing a background check in order to approve you for a car loan, mortgage or new credit card.
- Hard inquiry. On the other hand, a “hard inquiry” will impact your credit score. Hard inquiries occur when a prospective lender reviews your credit history in order to make a final decision on a loan application. These types of credit checks will lower your score and typically stay on your report for two years.
Check out our blog post to learn how credit checks impact your credit score and more about the differences between soft and hard inquiries.
3. If you’re on top of your credit, you’ll be better at catching errors
Reviewing your credit report once a year (at minimum) is a great way to stay on top of your credit activity and ensure the credit bureaus haven’t made any mistakes. They do happen and depending on the error, it could lower your credit score, which is definitely something you don’t want. Checking your score is also a good way to ensure you aren’t being charged by the wrong accounts and identity fraud hasn’t occurred.
4. You won’t be shocked by a loan outcome
If you’ve ever been denied a loan, you know it’s not a great feeling. By knowing your credit score, you can avoid being surprised by the outcome of a loan application in the future.
For most lenders, the decision to approve or deny your loan application comes down to your three-digit credit score (read What Is the Average Credit Score in Canada by Age for a detailed breakdown). In short, the higher your credit score, the higher your creditworthiness and the lower your credit risk. Most lenders want reliable borrowers and are more likely to give people with high credit scores a good interest rate.
At Birchwood Credit, we look at your entire financial situation, not just your credit score. We help all credit types, even if you have bad credit. You can learn more about our bad credit car loans and if you’re ready to buy a car, feel free to fill out a Car Loan Application and our team will help you through the process.
5. Knowing your credit score will help you improve your credit
Knowledge is power and it’s empowering to know where your credit stands. Ultimately, knowing your credit score – whatever it may be – will help you build your credit and work towards your financial goals.
Even if your credit is on the lower end of the scale (less than 620), it’s not the worst thing. A low score now doesn’t mean a low score forever and there are plenty of things you can do to improve it. Our guide, Rebuilding and Repairing Your Credit Score, will help you learn more about your credit score, how it works and how you can rebuild it if it’s not where you’d like it to be. Download the guide today and take the first step in improving your financial health.
When it comes to credit, it’s best to check your credit score regularly. You’ll be glad you did!
If you need a new vehicle and are looking for an affordable payment plan, our credit experts are ready to help you, even if you have bad credit. You can fill out an online Car Loan Application and our credit experts will help you find a payment plan that meets your budget and lifestyle. You can also reach out for a complimentary credit check.
Our offices have reopened, though if you’d prefer to shop from the comfort of your home, you still can with our Buy From Home program. Your entire buying experience will be 100% contactless from the loan approval and vehicle shopping to the test drive and delivery. You’ll even get a $1000 rebate and other added benefits. Visit our Buy From Home page for more information.