What Impacts Your Credit Score?

Do you know what actually impacts your credit score? Bruce Sellery (Credit Canada) breaks it down on our latest podcast.

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 If you have compromised credit and you go to get a car loan, what can happen, and this is a risk factor, is that that dealership may make multiple hard inquiries on your credit in order to get you financing. And we had a client who’s got their head kicked in because they had five hard inquiries to an already compromised credit score, and it took them to the basement. They would’ve been way better off to walk or take the bus because just the, that application process, significantly harmed their credit.

Hey, can you walk our listeners through that? Most Canadians don’t know that.

Yeah.

That the actual request for information affects your credit rating. Walk us through that.

Yeah, so your credit score is a function of a number of things, and one of them is the number of what are called hard inquiries on your file. So there are soft inquiries that don’t affect your file and that, you know, could be something like if you go to a FinTech and get a free credit score, that’s a soft inquiry.

It doesn’t affect your file. A hard inquiry is when you ask to borrow money or apply to a credit card company and they, I’m metaphorically doing this, but they call the credit bureau and say, Hey. This Bruce Guy wants a credit card. What do you think? Should we give it to him? Hey, this Bruce Guy wants a, Hey, this Bruce Guy wants a credit card, and if they suddenly receive five requests for Bruce to get a credit card, they get concerned.

And so that hits your score. The thing that most people know about their credit score is payment history, pay on time every single time, no matter what, like your life depends on it. Credit history, the duration of time. And the other one that really hits um, our clients hard is credit utilization. So this is the percentage of credit that you’re using at any given time, not when the bill is sent to you, but at any time during the month, any time.

Of what you have available and why that’s problematic is a lot of people have a credit card that’s maxed out and uh, on the one hand you think, well, if you’ve got a good score or you’ve got good income, you could get a second credit card or a line of credit and not use it. That’s gonna help your utilization dramatically and bring your score up.

The challenge is you then have to exert extraordinary self-control, not to use that additional credit.

And run it up.

Because all of a sudden you’ve run that up and then that’s hugely problematic.