Hannah Logan
Beth Buczynski
A good credit score can make it easier to get approved for credit cards, loans and mortgages, and help you secure lower interest rates when you borrow money.
But did you know that a higher score can also save you money on insurance premiums, help you earn credit card points and even make you stand out on property rental applications?
Let’s dig into these three often-overlooked benefits of having a strong credit score:
1. Lower insurance rates
Lenders aren’t the only ones who check credit scores before agreeing to do business with you. In Canada, insurance companies may also perform a soft credit inquiry to evaluate your overall financial responsibility. Those with higher scores may be rewarded with lower premiums, particularly with regard to tenant’s insurance and home insurance.
Nerdy Tip: A soft credit inquiry — sometimes called a credit check — allows the requesting party to see your payment history, what credit lines you have open and your credit utilization ratio, among other things. Soft credit inquiries have no impact on your credit score.
2. Useful credit card bonus offers
Though it’s generally inadvisable to apply for credit cards just to earn sign-up bonuses (otherwise known as credit card churning), a good promo offer can certainly be useful. Large sums of points or miles can get you that much closer to entertainment, travel, merchandise and more, depending on a card’s rewards and redemption options.
Many of the credit cards in Canada that come with substantial bonus offers require good or excellent credit scores. So, having a higher score will generally increase your approval odds.
Note that applying for a credit card usually requires a hard credit inquiry, which may drop your credit score a bit. But having a high score can help the temporary dip feel less impactful.
Nerdy Tip: There’s no strict rule about how many credit cards to have at once, but it’s a good idea to spread out your applications so that you can meet a cards’ minimum spending requirements within its set timeline. That will also help you ensure you’re not opening too much credit all at once.
3. Better rental approval odds
Having a strong credit score can give you a leg up over other applicants when it comes to finding an apartment or rental home.
It’s legal for landlords in most Canadian provinces to perform credit checks on applicants, so long as they have written consent. Just like a bank or credit card company, landlords want to make sure that you’ll pay your bill in full and on time every month. One way for them to assess how risky it would be to rent to you is to evaluate your credit score and credit history.
If a landlord is deciding between lots of otherwise similar applicants, having a strong credit score may push you to the front of the line.
Nerdy Tip: If apartment hunting is in your future, check your credit score ahead of time so you know what landlords might see. This can also give you time to take corrective action, if necessary.
How to strengthen your credit score
- Pay your bills on time. At the very least, pay the minimum payment every month on time. If possible, pay off the entire balance each month so you don’t accrue interest and increase your balance over time.
- Watch your balances. Your credit utilization ratio plays a big role in your credit score, and keeping it at or below 30% can help you avoid setting off any red flags that indicate you might be struggling with debt.
- Keep your oldest accounts open. Accounts that you’ve had for years show a long history of healthy payment habits. Make sure to keep one old account, especially if you are churning credit cards, so you have that strong record.
- Monitor your credit report for any inaccuracies. Mistakes happen and identity theft happens. Make sure you check your credit card statements and credit report regularly to ensure everything is correct.
- Diversify your credit. It’s better to have a mix of credit types, such as a line of credit and a personal or car loan, rather than several of one type of credit, such as having multiple credit cards and no other credit accounts.
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