Your credit rating is important. We can not deny that and that is why many Canadians want to know what a credit score is and why it increases or decreases at times. These are smart questions to ask yourself. We will tell you again, the state of your credit is the backbone of your financial life, whether you like it or not, whether you believe it or not. But, do you know that your credit rating is not the most important thing in your life, and even your financial life?
This may seem confusing, but here is a summary. Your credit rating is mainly important if you are looking to do business with a bank and want to borrow a large loan such as a mortgage. But if you do not want to do business with a bank, you should not be obsessed with your credit rating or accumulate debt for the simple purpose of getting a high credit score.
Here’s what you need to remember from this article
Not everyone needs to be obsessed with their credit rating, but everyone should definitely be interested in the information in their credit report.
Why should I know my credit rating?
This three-digit number represents your ability or inability to manage your credit, which is your credit cards and loans. If you want to apply for a mortgage or line of credit at your bank, you should probably know what is happening with your credit.
In addition, if you are looking to build or improve your credit, you absolutely must know where you are going from and how much effort you will need to put in a better odds.
Credit ratings are definitely useful for both you, the consumer and any of your potential future lenders. However, setting aside all your other financial goals or damaging other aspects of your financial life for the sole purpose of getting a perfect rating using credit should no longer be a priority.
What does your credit score represent?
Your credit rating tells you where your credit is. It’s just a three-digit number that you get. If it is around 700 or more, that means you have good credit. On the other hand, if it is under 600, it means that your credit is overdue. Your credit rating also tells you what your chances of being approved for a new loan are, but only in general. In principle, people with a higher credit rating are more likely to be approved for certain types of loans or financial products that require a credit check, but be aware that most approval processes are not solely based on your credit rating. A high credit rating does not guarantee anything and a low credit score does not condemn you for the rest of your life either.
What does your credit report represent?
Your credit report, meanwhile, indicates a lot of things. This is a complete file that gathers information relating to vote credit use. Your credit card accounts are there as well as the loans, lines of credit and mortgages that you could have if that is the case.
It’s not just a list of all your credit accounts that are currently open. There is actually information from the past 10 years as well as specific information about each of your credit accounts. Each of these accounts is divided into two parts: a letter that represents the type of account and a number that represents the position in which the account is located.
Reading your credit report can also help you spot any errors that may affect the calculation of your credit rating. In addition to helping you make sure you are not a victim of fraud. Your credit report is like a school report, but for your financial life. It shows you what you do well, like making your payments up to date, and what you could improve; maybe you have a collection account.
Your credit rating is your rating, and sometimes this can be very important, while your credit report is the explanation, and this is always important. Credit ratings and credit reports are financial tools that all consumers need to know and use to their advantage. But, if your credit rating becomes an obsession that takes over your financial life, you must rethink your goals.