Your credit score is a number you may not know about yourself but could have a large impact on your finances. If it is good you will pay less interest every month. If it is bad you will pay more interest or even refused credit.
Debt levels are going up in Canada, the average Canadian has $22,000 of consumer debt, adding onto growing mortgages. A bad credit score will increase your interest rate and a good credit score you will lower it.
That is real money. If you are the national average and have $22,000 in debt and have a poor credit sore you can expect something like this:
Interest rate at 19% equating to $4,100 just in interest payments each year
If you have a good or excellent credit score your reality is more like this:
Interest rate at 6% resulting in $1,300 of interest only repayment
Let’s look at a more dramatic example. Let’s say you live in a big city with an average housing cost of $1,000,000. You put 20% down and have a mortgage of $800,000. Over five years the difference between a good and bad credit score is $94,000. Improving your credit score may be the best thing you can do to meet your financial goals.
|Good Credit Score||Bad Credit Score|
|Pure Interest Payments||$91,725||$186,329|
The financial benefit of a high credit score is obvious. So now what?
There are five contributors to your credit score:
35% payment history
30% amount owed
15% length of history
10% new credit
10% types of credit used
All this month I am going to deep dive into credit and improving yours. Join me by:
1. Finding our your credit score – you can do it for free at Credit Karma
2. Get a free copy of your credit report
3. Commit to making some changes