Skip to main content

What is a credit score! 

When I was in college, I didn’t know what a credit score was. I opened up my first credit card my first year of university with a $1000 limit, pre-approved, with a free t-shirt to boot. I understood that if I spent $1000, all I had to worry about was being able to pay $10 as the minimum payment. So began my use of credit cards. 

I never understood details of credit score, or why carrying a credit card balance was a problem. I never understood that charging items on my credit cards could end up costing me so much more than the actual ticket price.  I believed that paying interest was ok because it allowed me to do things I wouldn’t be able to do otherwise!! It’s so funny to me now to remember my thought process back then. But not funny when I think of how much money I wasted by not understanding credit cards. I always paid on time, which kept my credit score in good standing, but I didn’t know exactly how credit scores worked, or why I should care.

Not understanding credit and not paying on time, can get people in trouble. And if you don’t understand the consequences, it will come back to haunt you, right when you need to do something that requires a good credit score. 

A credit score is a number between 300 and 850 (called FICO Score) that becomes attached to you based on your credit history. Opening and using credit cards, taking out car loans, mortgages, etc are all things that contribute to your score. When starting out, you have little credit history so a low score is expected until you start showing your payment behaviours such as paying on time, how much credit you have available versus what you have used, and how often you apply for a loan. 

 A credit score can significantly affect your financial life. It plays a key role in a lender’s decision to offer you credit. Based on your score, you will either be offered a low interest rates (with a high credit score) when you apply for loans such as mortgages and car loans, or you will be offered high interest rates, or denied approval for credit because of a bad score. 

A credit score is based on your credit behavior. The score is calculated using the percentages listed for those behaviours which include – Applying for new credit, (10%), Mix of credit (credit cards, loans, mortgages, etc) 10%, Length of credit history – 15%, Amounts owed – 30%, and your payment history – 35%. The higher your score, the better as you will be considered low risk to those who are considering lending to you. They want to make sure they are going to get paid back!

Let’s look at each of these categories:

  1. Applying for new credit – The more you apply for credit, such as car loans, credit cards, lines of credit, the more your score takes a hit.
  2. Mix of credit forms 0 Not having different forms of credit will keep your score from increasing, so it’s good to have a mix, but if it’s maxed out, then it will makes things worse. 
  3. Length of history – the longer you have credit cards, for example if you have had cards open for many years, gives you an established history.
  4. Amounts owing – if you use more than 30% of your limit on credit, then your score will be lower. Best is to only spend 10% or less of your limit to get the best scores. If you are rebuilding, keep it to 10% or less, but put something on it every month or so, as opposed to not using it at all. 
  5. Payment history- This and amounts owing make up 65% of the total score. If you miss even 1 payment, your score can drop dramatically. 

While every creditor defines its own ranges for credit scores, the average FICO score range is often used:

  • Excellent: 800 to 850
  • Very Good: 740 to 799
  • Good: 670 to 739
  • Fair: 580 to 669
  • Poor: 300 to 579

The major credit reporting agencies are Equifax, TransUnion and Experian. Your creditors may report to any of these or all 3. Scores can be different in each agency. 

Now that you know how it is calculated, what are the consequences of a low credit score? 

  • If you get approved for a loan, for example a car loan, with a low score, then you will end up paying a higher interest rate over the life of the loan, which can result in thousands of dollars difference
  • If your score is too low, you will get denied for the loan as you will be deemed too high a risk
  • Renting an apartment or house. A landlord may ask to check your credit which will tell them if you are a risk to rent to by potentially not paying on time. If you have a low score, it will be more difficult to get approved, and they may require a larger security deposit
  • Utility companies when you go to open hydro, or internet, etc may also ask for a security deposit. 
  • Possibly get denied a cell phone contract. Since they are extending a month of service, they want to be sure they will get paid, so again, if approved, higher deposits, or more upfront payments. 
  • Certain jobs will require a credit check. They don’t see the score, but they can see if there are items on there, such as bankruptcy, or high debt loads, and for jobs in the finance industry, or upper management jobs, employers are looking for things that may impact your performance
  • Higher insurance premiums could also be a consequence, with higher premiums the lower your score. Premiums are not solely based on credit score, but could be a factor.

A bad credit rating can cause a great deal of stress. The interesting thing to note, is that if you are not paying your bills on time, you are ultimately getting charged more money because of it due to higher interest rates, with the fear of being denied something like a place to live. This is why understanding that your behaviours with debt can ruin your life.

If you have a bad score ways to improve

  • Pay every bill on time every month. Set up automated payments if you have difficulty with this. This counts for 35% of your score, so this is a priority
  • Pay off debt so that your utilization is low. If you owe $5000 in credit card debt and $10,000 is what you have available, get it paid down first to $3000. This would then mean you are using 30% of your available credit. The goal is to get it below 10%, even 6 is what FICO will show as best way to significantly improve your score quicker. 
  • Don’t close credit cards necessarily. If you have $3000 in credit card debt and have $10,000 in credit limit, then you are at 30%. If you close a card that say has $4000 limit, now your available credit is $6000, now your utilization is at 50%
  • Pay off credit cards every month. 
  • Don’t apply for more credit
  • Check your report to make sure all information is accurate. And check it often. 

 

 Establishing a solid credit rating is key to building life-long financial stability and not throwing away money on high-interest payments. Rebuilding takes time and effort, but it will improve if you commit to doing the work. 

Leave a Reply

6 Steps To Financial Freedom

6 Steps To Financial Freedom

Learn strategies to start the path of becoming Financially Free. Reduce stress over finances and improve money management skills.

Register for the waiting list:

Or email for more information and pricing

Learn more about our programs

90 Day Journey to Rebuilding Credit

Information coming soon

Schedule a complimentary consultation call here.

Or email for more information and pricing

Learn more about our programs

30 Day Money Bootcamp

This is an intensive course that takes commitment and making dealing with your finances a priority. This is a high octane program where you want to improve your money management skills and improve your financial health as quickly as possible. We focus on tools to pay off debt fast, follow a spending plan, increasing income and cutting down on expenses without taking the joy out of living your life today.

Prerequisite includes:

  • Completion of the Road to Freedom: Clarity Session
  • A working Abundance Plan (Developed in the Clarity Session)
  • Good to Excellent Credit Score
  • Highly motivated to improve your financial health
  • Can devote up to 4 hours each week of the 4 week program.
  • Endorsement from Danielle, your Money Coach

I only take on 4 people a month for this program due to the highly individualized attention that is needed.

Starting on the 1st of each month. 

  • Week One – 2 hour session
  • Week 2, 3, and 4 – One hour sessions
  • Pre-work and Homework assignments
  • Email Correspondence

A 30-minute bonus virtual meeting with me per month for the following 2 months after completion of the 30 days.
Take the first step and schedule your Road to Freedom: Clarity Session today!

Schedule a complimentary consultation call here.

Or email for more information

Learn more about our programs

Business Mastery Program

A small business owner often wears all the hats. And it can be very overwhelming. I know because that’s me! Working with a coach, as I do, helps with focus, motivation, and accountability. By having a financial coach specifically, it can make the difference between profit and loss.

The Business Mastery Program is a 4 or 7-month program which includes developing an Abundance Plan for not only your business but your home life as well. It is necessary to know what you need to make in order to keep your needs met at home. Then we look at what tools we can use to make dealing with finances in both areas easier and organized. While different from an accountant, there are some areas that overlap, but this program focuses on behaviours on why certain decisions are being made, and ways to improve them.

Prerequisite for joining the program:

  • Completion of Clarity Session
  • Small businesses

Business Mastery Program:

  • Month 1 – Weekly 1 hour sessions
  • Month 2-7 – Bi-weekly 1 hour sessions
  • Prep work and homework assignments
  • Email Correspondence
  • 30 minute follow up after completion of program

Schedule a complimentary consultation call here.

Or email for more information and pricing

Learn more about our programs

Road to Financial Freedom Program

You are ready for change. Ready to see your bank account increase, debt disappear, and investments growing to reach your financial long term goals. You believe financial freedom is possible! Learn how to mindfully save and spend while improving your financial health.

Most people admit that they just wish they had a plan to follow. With the Road to Financial Freedom, your goals and priorities and taken into account to develop a custom plan and action steps to start moving towards financial freedom today.

This program has 3 stages:

  • Clarity Session
  • Abundance Planning and Mindset Reset
  • Wealth Planning and Long Term Goal Setting

Road to Financial Freedom: Clarity Session. 

This session will jump-start your money journey and define your big life goals while putting a plan in place with action steps that you can implement today to start seeing improvements in your money management skills. This is a 2-hour virtual meeting plus pre-planning work before the session.

Road to Financial Freedom: Abundance Planning and Mindset Reset. 

After completion of the Clarity Session, this is the next stage of the Road to Financial Freedom program. This 4 month program begins with implementing the Abundance Plan and tweaking it to make it custom to your lifestyle. We then look at values and principles, with learning what past events and money personalities have developed your current money behaviours and habits. Once an understanding of why we make the current decisions we do, then we look at improving those habits and behaviours.

  • Month 1 – Weekly one hour virtual meeting
  • Month 2,3,4 – Bi-weekly one hour virtual meeting
  • Prep-work and homework assignments
  • Email Correspondence

Road to Financial Freedom: Wealth Planning and Goal Setting

After completion of stage one and 2, this 3 month program works with you to look at putting together an investment strategy and determine what those investments are for. What goals are you working towards? What do you want your life to look like in the future? How can we get there? How long will it take? While we will still make sure all is on track for today, this stage is working on your Financial Freedom Date and ensuring actions today are aligned with the future.

  • Month 1, 2 and 3 – Bi-Weekly 1 hour sessions
  • Prep-work and homework assignments
  • Email Correspondence

Schedule a complimentary consultation call here.

 

Or email for more information

Learn more about our workshops

Get Out of Debt & Stay Out For Good

Many resources are available to help eliminate your debt. Make sure you are choosing the right methods to get rid of debt once and for all.

Register for the waiting list:

Or email for more information and pricing

Learn more about our programs

Journey to Home Ownership Program

Time to get your Financial House in order!

If you are considering purchasing your 1 st home or looking to sell and find your next one, this program is for you!

The 90 day Journey to Home Ownership Program will help you make sure the potentially largest decision (and emotional decision) of your life is made in a smart way so that it won’t bankrupt your future.

Buying a house is exciting and sometimes terrifying! The Journey to Home Ownership program will help you build a solid financial foundation and prepare you for what to expect financially as a homeowner. It’s not just about affording the mortgage, it’s about how to be prepared for the other expenses, fixed or unexpected so that there are no surprises once the house is closed.

We will look at saving for a down payment and increasing credit score, as well as future goals outside of homeownership. It’s important to understand it’s not just about affording the mortgage payment, but all of the other expenses that come with homeownership. Having a clear picture of your financial life in your new home before you purchase will help you with making those smart decisions.

Prerequisite for joining the program:

  • Completion of the Road to Freedom: Clarity Session
  • Highly motivated to get your finances in order before you purchase
  • In the process of buying a house
  • Committed to doing the homework necessary to have a plan for the future

Included in the program:

  • Month 1, 2 and 3 – Bi-weekly 90 minute sessions
  • Prep work and homework assignments
  • Email Correspondence

Schedule a complimentary consultation call here.

Or email for more information and pricing

Learn more about our workshops

Money Skills for Kids & Young Adults

Teaching kids good money habits is usually low on the list. Learn how to teach kids good money skills and behaviours using fun techniques.

Register for the waiting list:

[activecampaign]

Or email for more information and pricing

Ready to take control of your money?

Free eBook Download

Complete the form for access to our Road Map to Financial Freedom eBook

We don’t spam! Read our privacy policy for more info.

Free EBook Download

Complete the Form For Access

Learn more about our programs

Till Debt Do Us Part

Information coming soon

Schedule a complimentary consultation call here.

Or email for more information and pricing

Learn more about our workshops

Vision of Financial Success

What does your future hold? Dream about your vision of financial freedom and start your journey to achieve it. Learn the importance of having a vision.

Register for the waiting list:

Or email for more information and pricing

Learn more about our workshops

Your Ultimate Financial Power Plan

Develop your Abundance Plan that is easy to follow and improve your day to day money decisions. Learn how to save and spend with intention.

Register for the waiting list:

 

Or email for more information and pricing