A Canadian woman had a startling wake up call on the importance of having a good credit score after hers hit rock bottom.
Speaking with CTV News, Gloria — a pseudonym given to hide her true identity — said she received a credit card bill in February for $389, which she believes she paid. Her bank thought otherwise (1). The financial institution continued to send her the same bill month after month, with interest accruing.
Gloria did not want to pay the bill twice and refused to send any money for eight months. As a result, her credit score bottomed out. This led to a string of financial issues: Her home insurance doubled in price, her new credit card application was denied and she was unable to cosign for her son’s car loan, she told CTV.
“I thought they were going after me for the money. I never thought they were going to destroy my credit score,” the woman told the news outlet.
Don’t Miss
- Want to retire with an extra $1.3M? See how Dave Ramsey’s viral 7-step plan helps millions kill debt and build wealth — and how you can too
- A new nationwide survey of financial leaders warns Canada may face a recession in six months — protect your wallet with these 6 smart money moves ASAP
- Warren Buffett used these 4 solid, repeatable money rules to turn $9,800 into a $150B fortune. Here’s how to apply them to your own life
Why your credit score matters
A credit score is a three-digit number that represents your creditworthiness based on how well you pay off debts and manage credit. This number positively, or negatively, signals to lenders how likely they will be repaid if someone seeks out their services or financial products (2). As such, a higher credit score can lead to lower interest rates, more lending opportunities and even help tenants get their rental application approved.
On the other hand, having a poor credit score can limit your credit worthiness and make lending more expensive via high interest rates. In some cases, a low credit score could affect your ability to rent a house or even get hired for a job. Not paying a credit card bill on time, taking out too many loans at once and running a high credit card balance are all actions that can lower your credit score.
What constitutes a “good” or “high” credit score is relatively nebulous — there is no magic number. That said, credit reporting agency Equifax lays out a helpful range (3): Score of 660 to 724 – Good Score of 725 to 759 – Very good Score of 760 and up – Excellent
Achieving a high credit score takes time and discipline. Some steps that Equifax recommends consumers take to increase their credit scores include paying bills on time, keeping your credit card balance low and not applying for multiple loans or credit cards in a short period of time.
Read more: Here are 5 expenses that Canadians (almost) always overpay for — and very quickly regret. How many are hurting you?
How to deal with a transaction or billing issue
If you’re in a similar situation to Gloria and are confused by something on a bank statement, do not stop paying the bill. Instead, pay the bill first and then begin the disputation process, otherwise you will be charged interest and your credit score will take a major hit.
To fight a payment on a credit card bill, contact your financial institution with the evidence you have, such as an online bill payment record. This should be enough to get the ball rolling towards a resolution with your bank.
If you’re dealing with a transaction you think is incorrect, start by contacting the business that issued the charge. Explain what happened and give them receipts and other evidence to back up your narrative. If the business is not receptive to your objections, contact the credit card issuer directly to resolve the issue (4).
Additionally, if your credit score was unfairly impacted due to the result of a transaction or billing issue, you can apply to Equifax to dispute your credit report (5).
How to rebuild your credit score
Maybe you’re in Gloria’s shoes with your credit score hitting rock bottom. Thankfully, there are a number of ways you can build your credit score back up according to the Canadian government (6).
- Pay bills on time. Always paying your bills on time — even while going through a dispute — is a key pillar to improving your creditworthiness.
- Be strategic about credit usage. Never go over your credit limit. In fact, using less than 30% of your available credit can help rebuild your score.
- Use multiple types of credit. When you are past rock bottom, having multiple types of credit on your report (e.g. a mortgage, credit card, car loan) can show lenders you can handle multiple types of debt. But make absolutely sure you can repay any borrowed funds.
Your credit score is the financial equivalent of a hand shake: it reveals your character instantly. Treat your score with utmost care, as a high number can open countless financial opportunities, while a low one can leave you with can severely limit your options.
What To Read Next
- Boomers are out of luck: Robert Kiyosaki warns that the ‘biggest crash in history is coming’ — here’s his strategy to get rich before things get worse
- Ray Dalio just raised a red flag for Americans who ‘care’ about their money — here’s why Canadians should limit their exposure to U.S. investments
- I’m almost 50 and don’t have enough retirement savings. What should I do? Don’t panic. Here are 6 solid ways you can catch up
- Here are the top 7 habits of ‘quietly wealthy’ Canadians. How many do you follow?
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CTV News (1); Canada.ca (2, 6); Equifax (3, 5); Peoples Law School (4)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.