Most Canadians come face to face with their credit profile at some point in their lives. Even if you’re not making a huge purchase, if you’re applying to rent or get a cell phone plan, your credit might be checked.
How’s your credit? Have you checked it recently? Your credit affects your life in a lot of ways, but one of the ways you’ll notice your credit score the most is how it affects your buying power.
Your Credit Profile Affects Your Interest Rates
Very few Canadians make it far in life on just cash. As nice as that would be, sometimes larger purchases like a house or a car require the use of credit. While your credit score will determine if you actually qualify for a loan in the first place, it also determines how much that loan will cost you.
Your credit score is an indicator to potential lenders of how much risk it is to lend to you. The higher your credit score, the lower the risk and subsequently the lower your interest rate. This is great news if your credit score is already high! However, if your score is less than desirable, you may want to explore some ways to improve your credit score.
Your Credit Score Affects Your Borrowing Power
In addition to determining how much a loan will cost you, your credit score determines if you’ll actually qualify for a loan in the first place, and how much you qualify for. Credit scores range from 300, which is the minimum to 900, which is the maximum.
If your score is closer to 300, it could be because you don’t have a long credit history. Don’t worry though, there are some easy ways you can manage your finances to start building your credit.
Many believe that 650 is the magic credit score. If your credit score is below that, you may have a hard time securing a loan for anything. While if your score is above that, you will likely qualify for a standard loan. See one of our previous blog posts if you’d like to learn more about credit basics.
Your credit score is one of the largest determining factors when it comes to your purchasing and borrowing power. Purchasing a home, a car or even acquiring a cell phone plan are made much easier when your credit score is in good standing.