Credit Scores: When Was the Last Time You Checked?

It has been said that “there are two things you should never be without: your reputation and your credit rating. You can destroy them both in an instant and spend the rest of your life trying to get them back.” Over the summer, the long-term credit rating of the world’s largest economy was downgraded for only the second time in history. Fitch downgraded the U.S. rating from AAA to AA+. A country’s credit rating is an independent assessment of the country’s creditworthiness, which can give investors insight into the level of risk associated with a nation’s debt, as expressed by a letter system. Canada maintains a similar credit rating to the U.S. of AA+ (Fitch). A downgrade is generally seen as a signal of concern about a nation’s creditworthiness. However, given the suggested political “dysfunction” over the spring debt ceiling debate, the recent downgrade may be less related to the U.S.’s ability to pay its debt and more related to its willingness to do so. This is a good reminder that, as individuals, we also have “credit ratings,” as expressed through our credit score — a numerical range between 300 and 900, with a score of over 700 considered as good. The two main Canadian credit bureaus, Equifax and TransUnion, keep track of your credit through public records of lenders like banks, collection agencies and credit card companies and assign a score based on your credit history and your ability to pay bills on time and in full. When was the last time you checked your score? There may be reasons to make this a priority, especially if you haven’t checked lately. Establishing good credit can take time. One common issue seen with older couples is that one spouse may have a good credit rating, but the other will have none. If the spouse with the good credit rating passes away, the other often has difficulty qualifying for a loan or obtaining a credit card. Building a good credit score takes time. You may uncover or protect against fraud. Periodically accessing a credit report may be valuable not just to check your credit score, but also to help guard against identity theft. A credit report may list accounts that you haven’t opened, which may uncover possible fraud. The credit bureaus also offer monitoring services that can notify you if there are changes to your credit position. You can also add security measures, such as a fraud alert, when financial providers issue new credit in your name. Some of these services incur fees, but the cost may be worthwhile as fraudulent activity becomes increasingly sophisticated. Your credit score matters. Many young people may have limited experience with credit and do not realize that having a good credit history can make life easier. It is important because your score determines how lenders assess your credit capacity — the higher the score, the greater the likelihood that you’ll be approved for mortgages, loans or credit. It is also often checked when applying to rent a property and is sometimes checked during the job application process.

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