Credit Scores: What You Need To KnowApr 18, 2018
In this podcast, our Licensed Insolvency Trustees (LIT) dive into things you might not know about — credit scores and credit ratings. Listen to the podcast to get insight on topics including:
- Does checking your credit score actually hurt your score?
- Does high consumer debt balances negatively affect your score?
- Why closing a credit card account isn’t always a good idea.
- How parents can help teenage children build a good credit history and a credit score.
- Does your spouse, ex-spouse or significant other’s credit score get impacted should you file bankruptcy or a consumer proposal?
With a barrage of TV commercials and internet ads offering ways for you to check your credit score for free, it might leave you wondering if this really is a good thing. One common misconception is that checking your credit score can hurt your score.
The good news is that checking your credit score will not necessarily lower your score. Our LIT’s delve into this deeper in the podcast, but to give you a quick idea there are two types of credit checks; a “soft hit” and a “hard hit.”
When you check your own credit score it’s considered a soft hit, but if you applied for a new form of credit such as a mortgage, credit card, line-of-credit, or personal loan it would be a hard hit. Think of it this way: if it’s going to increase the amount of credit you carry, it is a hard hit with the potential of hurting your credit score.
However, keep in mind that your credit score is only one factor lenders will look at when deciding on whether or not to approve a credit application. Additional factors they will look at include your overall credit report and a credit rating, which identifies whether you are a high, moderate, or low risk.
Knowing your credit score can help you make informed decisions about whether or not it’s a good time to apply for further credit; or if you should focus on paying down current debt to improve your score first.
Make sure to listen to the podcast to find out how you can check your credit score and how often you should be doing it.