How to Get a Free Credit Score in Canada
A credit score is an important financial tool for anyone, especially for financial institutions. Your credit score can determine not only how much interest you’ll pay for a loan, but also if a financial institution will allow you to borrow at all. If you check your credit score you can help avoid any bad surprises when you go to apply for a loan.
Here, we’ll outline some of the ways you can do that, and specifically why a free credit score, as easy as it may seem, might not be your best option.
What’s the Difference Between My Credit Report and Credit Score?
Your credit report has a lot of valuable information that will be an important factor in many financial decisions and relationships throughout your life. The report usually contains the following:
- Personal Information (e.g. name, birth date, address),
- Current and prior employment information,
- Banking information,
- Credit account details, including transaction and payment history,
- Any inquiries into your account, and
- Any Bankruptcies, judgements against you, or accounts in collection.
Most of this information stays on file for six years at most.
The basic premise of your credit score is that it takes all the information from your credit report, and compiles it into one number between 300 and 900, with numbers above 660 being considered good. In essence, your credit report and credit score show similar financial information in different ways.
Why Should I Check My Credit Report and Credit Score?
Your credit report and credit score summarize your financial history in a way that lenders can look at it and decide how much of a “risk” it would be to lend to you. This can impact the process of applying for credit cards and major loans, so it is important that you know what’s on your report.
Another point to note is that this information on your report is coming from many different places and can sometimes be out of date, or even incorrect. Mistakes happen, so it is a good idea to keep a consistent eye on your credit report and score.
As well, keeping track of your credit score and report is important if you want to increase your score. For example, if you have just gotten your first credit card or if you are having trouble managing your credit and want to rebuild, having a reliable and consistent way to check your score might be beneficial. That way, you can directly see what actions you take have an effect on your score, and hopefully begin to build your credit up.
How Do I Check My Credit Score?
There are a few ways to get a credit score check, both paid and free.
1. Through a major consumer credit reporting agencies
In Canada, there are two major consumer credit reporting agencies where you can access your credit report and credit score: Equifax Canada and TransUnion Canada. Both offer similar services, including a free credit report every 12 months and a selection of paid and free services to obtain your credit score more frequently.
2. Through a free credit monitoring service
There are also free providers who offer you similar services as Equifax and TransUnion at no cost, such as Credit Karma. These providers will buy your credit reports and scores from Equifax or TransUnion and then give them to you for free.
3. Directly from your bank
It has recently become more common for banks to provide their customers with their credit scores through online banking. As of right now Scotiabank, RBC, CIBC, BMO, and more, show customers’ credit scores for free through their bank accounts.
If you don’t do your personal banking with any of these financial institutions, it might seem like obtaining a free credit check from a free service is the best, and cheapest, way to go.
But, before you decide how to acquire your credit score, it is important to understand your options and why some sites are able to give you your score for free.
The Problem with Free Credit Scores
As the saying goes, there is no free lunch.
Businesses like Borrowell and Credit Karma, while supplying you your credit score free of charge, are still making money with the information within your credit report. These companies don’t sell your information, but they can use the information present in your credit report to advertise financial products that are tailored specifically to you.
After signing up for one of these services, it is likely that you may receive emails for offers for different credit cards and other financial services, and if you decide to purchase this product the company will receive a commission in return.
So, why could this possibly pose a problem?
As per above, a credit report typically contains a lot of information. This means that they know your financial background and can target their ads with services that you might personally benefit from, so that you are more likely to be interested in them.
Since their main goal with these advertisements is to make a profit, they will try to make you spend as much money as possible.
Why Should I Know This?
Even if you opt to not use a free credit score service, or even if you do but don’t pay attention to the advertisements, it’s still important to know and understand why and how these companies work the way they do. More importantly, you need to know your own spending habits and weaknesses.
By knowing what to expect if you sign up for one of these services, you can make a more informed decision. The more knowledge you have about the financial world, the better off you and your finances will be in the future.
Contact Us – We are Here to Help!
If you are concerned about your credit score, and it is suffering due to the debt load that you are carrying, we offer different credit counselling options that can help you improve your financial future. We offer a free initial consultation where we will take a look at your situation and advise what options are available.
Contact us at one of our convenient locations, or online, to take your first steps to a better financial future.