This article was written by Woofy in our new Personal Finance Canada Section. Woofy has a blog as well which you can check out here. Thanks Woofy for the awesome article 
I was reading through the ways to save money thread, and thought about how we missed out credit scores and credit reports!
Credit scores and reports are such a big part of our lives, and I strongly believe that learning about it, and knowing how to manage your credit score is going to help us save a tonne of money in our lifetime!
So, I am starting this thread to talk about credit scores.
First, what is a credit score?
A credit score is mathematically calculated by all the information found in your credit report, and translated into a 3-digit number between 300 to 900, and lenders use this number to gauge your credit history.
An average credit score is around 650, and a score of 520 is generally required to qualify for a mortgage.
Why is credit score important?
Think of the credit score as a report card on how you are doing financially in your life. J
All lenders based their decision on whether to extend credit to you on your credit score. All lenders, from your bank, to your car dealership, to your department stores credit application to your landlord, they all rely on credit scores to help them access whether you as a credit applicant will be reliable in making your payments, and if it is worthwhile for them to take on the risk of lending you money.
And most importantly, the higher your credit score, the better chance of you negotiating for the best rates you can get from a lender. I think this is where you will find that you will get the most savings over the course of your lifetime financial activities.
Consider this simple example:
For a $100,000 mortgage at 5% interest rate, paid over 25 years, you will be paying $75,377.01 in total interest to the lender over a span of 25 years.
For a $100,000 mortgage at 3.25% interest rate, paid over 25 years, you will be paying $46,194.87 in total interest to the lender over a span of 25 years.
That’s a savings of $29,182.14 over 25 years, which translates to $1,167 a year!
I’m not sure if you think that is much, but for me, I’d much prefer to have that $1,167 in my own pocket, than in the pockets of my lenders!
So, hopefully, I have managed to convince you that your credit score and report is a very important financial tool that you should learn to manage. J
I will write about ways to improve our financial report card in a future post.
Woofy rocks my socks
Very nice! Interestingly enough, I am buying a house and the mortgage will be that $100 000, lol. Interest will be 3.69%… once I get into the swing of things, I’ll very likely change it to bi-monthly… or liklier… weekly, as THAT saves thousands of dollars in interest as well!!
Also, good to point out to check into the credit burue (sp?) and how often your credit cards share your info with them… my mortgage broker told me my PC MC had only reported my stats once… and I’ve been with them for… 5 years!! My score was great, but with no new info/old info, etc… my score could go down without warning!! I have to call PC MC and ask them to report more often!!
How do you check out the credit score without paying for the report?
You can request credit reports from various credit bureaus, e.g. Equifax, or TransUnion, free by mail. But the report doesn’t tell you the credit score.….
Also my experience has been that the credit bureaus don’t share information as we believed, so it’s safe to request a report from each of them, to avoid any possible errors.
Weekly or Bi Weekly is your best bet to accelerate your mortgage and get it paid off ASAP
Avoid signing up for the credit cards just to get a free gift…everytime you do that it affects your score!
lien against me for student loans, old credit card debts,and who knows what else? I’m quite confident my credit score is pretty low.
astimegoesby — I got my credit score from the bank recently when we purchased our current home. Our banker let me see my credit report, but stated right off from the beginning oould not provide me a copy
Just go to each of their websites to get a copy of the application forms. Transunion now allows you to use the phone to get a copy of it mailed to you. Fax or mail the paperform for a free copy. One for each of the 2 credit bureaus. Takes about 1 week to get it — you can request as many times are you like for free.
Great post thx a lot !
Reply to Thomas: Thanks for the info. I’m ‘selling’ my house to my oldest son but won’t get paid until he’s finished the renos and then sells. We’ve agreed on a fair price (to both of us) and he will hopefully make a good profit on his first ‘flip’. Due to poor health and a divorce my fnancial situation isn’t great. Once all is finished with the house I’m hoping to have enough money for a good downpayment on a condo. I’m very worried about my credit score…and didn’t know I could order copies without paying. Now I’ll at least know what to expect when the time comes to purchase…if I’m able to. Great advice, thanks.
having a bad credit score also affect other non-borrowing aspects like your cash withdrawal limit at a bank machine and even how much car and house insurance you pay (sometimes). generally having a bad credit score gives institutions the green light to charge more, because they know you have less options.
What I want to know is under what circumstances can someone negatively affect your score? If I do not have a contract with a company and they send me a bill for something I do not agree with, naturally I refuse to pay, do they have the ability to report me to the credit bureaus? I just was in a situation like that, lucky I know the consumers protection act and got them to drop the charges, but before that, they were threatening to affect my score.