How you can achieve a high credit score

November is Financial Literacy Month and once a week we're going to be checking in with financial literacy coach Bev Wilkes to talk about managing your money. Hi Bev. Hi. Okay so this week we're going to be talking about your credit score. Why should I care about my credit score? Credit score is a very important three-digit number that tells lenders how good you are at paying them back and paying them back on time. Okay so what makes up a credit score exactly? So there's five components. But the biggest one that's really important for everybody to remember is your payment history. That accounts for about 35% of the score. This is very important because this is how well you are at paying them back. Paying back anything that you own and that you're paying it back on time. Ah, okay. So what if I have a credit card and I can't pay down the entire credit card, but I do make my monthly payments. Perfect. That's fantastic. As long as you're paying it on time, that's really important that you're being consistent in your payment back of the loan that you have. Okay. And when we're paying back, let's say I pay down my mortgage, my mortgage completely. I pay off my mortgage. I don't need a credit card anymore at all. That doesn't help my credit score. Why is that? It seems counterintuitive. It is a little bit counterintuitive because you are lessening the amount of credit that you have available to you. So let's say you have a credit card that you haven't used in a while. It's sitting in a closet drawer. Fine. But if you would close that credit card, that means you don't have access to that money that and in the eyes of Equifax and the credit bureau, they're like, oh, let me just make sure lower the amount of credit available to her. Okay. And that's not what we want. Okay, so what do I want then for a credit score? You want a nice credit score. 700 and up would be ideal. In Canada, our credit score ranges from 300 to 900. In the U.S., it's from 300 to 800. And you could check your credit score by talking to people at Equifax, looking online at your bank, or even TransUnion. Okay, and when I'm looking for it, what... Why am I looking for, what would I, so my credit score is 700. What does that get me? Well, that's great if your credit score is doing well, because then that means when a lender looks at you, they're like, oh, this person pays her bills on time. I could probably give her a better interest rate. I could give her something a little extra to make sure that she is coming to me for my loan, and then they know that you're going to pay it back. Okay, and what kind of scenarios should we be careful? Let's say we're looking for some kind of financing. You know, you move out of town, let's say, and you're buying a new house, and you have to equip everything, and you might want to get some financing. You might want to get a new car, perhaps, in a new city. How does that affect your credit score? So we're trying to keep our credit utilization to 30%. Okay. So let's say you have a credit card that's $1,000, but the limit is $1,000 and you have a $200 balance on it. That means you use 20% of that credit card's limit. Try to keep it under 30. So if you just move to town and you need to buy a bunch of things, which is great, I need you to try not to do it all in the same week. Don't go and have the lender ding your credit score with a hard look in one week. So you want to get a car, you want to get a new credit If you have a credit card, you want to get a mortgage, Try to space it out so that you don't get a ding on your credit score. These are all things I never knew. I really never, I knew credit score was important in terms of getting financing or whatever, but you've really explained it well. Thank you. My pleasure. And you're going to be talking about another topic next week because it's Literacy Month. What are you going to be talking about? So everybody talks about, oh, I bought a house, which is great. I have a mortgage, but they're not talking about all the other things that come with buying a house. So we're going to dive into moving. Other costs like welcome tax, property taxes, the notary, a bunch of other things that people need to consider when buying a house. Thank you so much, Bev. My pleasure.