You are never late for your payments. Yet your credit rating has gone down. Why?
It happened to some of my relatives. They pay their accounts and bills on time and reset their credit cards to zero each month before they are due. Yet their credit rating has gone down for no apparent reason. Credit score depends on how you use all the forms of credit you have access to personal loans, lines, milestoneapply.com credit cards, merchants, rent, insurance, etc. All of these interactions are transmitted monthly to the Equifax and Trans-Union credit bureaus, which collect your credit report and adjust your credit rating accordingly (with an algorithm). But what is a credit score? This is a number that lenders use to help them decide whether to extend credit to you and at what rate. It varies between 300 (bad) and 900 (perfect). Yours is 760? It's excellent. Between 700 and 759, it's very good. Less than 560 is bad for you. The rating sets the level of risk you represent for a lender, which refers to it to whether they can expect you to honor your loan or payment agreement.
Have a good rating
The higher your rating, the better your position will improve to negotiate favorable terms when you borrow. It is calculated according to five criteria:
1. Payment history: 35%
2. Balance due against credit limit: 30%
3. Age of your accounts: 15%
4. New credit requests: 10%
5. Number and variety of creditors: 10%
The more lenders you have, the more risk you pose. Keep only two credit cards (the oldest), cancel the others (especially store ones), and make sure the cancellation is on your credit file. If you never use one of your credit cards or leave an outstanding balance of a few dollars past the due date, your rating will be affected. Make a small monthly purchase on your unused card.
ADVICE
Every year, check your credit report for free
• Equifax: 1-800-465-7166
• TransUnion: 1-800-508-2597
The free version, however, excludes the credit score. Write a reminder in your calendar. Several studies confirm that a quarter of credit files contain errors (corrections are free).
■ Desjardins, Royal Bank, and CIBC Bank offer your credit rating free of charge. Otherwise, you have to pay $ 20.
■ If you maintain an average card or line of credit balance of over 50% of authorized credit, it will affect your rating. The ideal is under 35%.
■ The longer you have a history with a card or lender, the better your rating will be.
■ All delays of 30 days or more affect your credit rating and report.
■ If you multiply credit applications (with cell phone companies or insurers, for example), your rating will be affected.