A credit score has a fundamental impact on the life of any prospective borrower. Normally, you have to pay to check your own score, but a growing number of banks and fintech apps are making it possible to check your credit score online for free. This is the case with Desjardins, which, in partnership with TransUnion, offers the possibility of consulting your credit score through AccèsD, its client portal. So, why check your credit score? What is it for?
A credit score is a number between 300, which is considered poor, and 900, which is considered excellent. It is used to evaluate your creditworthiness; it either builds confidence in you as a consumer or leads to distrust in you. Lenders, such as those who will give you a new credit card or a car loan, assess the risk they are taking in financing you.
What do the agencies base their judgment on? Sure, we all feel a little insecure when we realize we are not at 900. Several things are taken into account, including the amount of your debts, the type of credit used, the intervention of a collection agency, and the presence of an insolvency or bankruptcy file. In addition to these factors, they also consider how long you’ve had credit, your balance forwarding , whether you’ve not paid your debts on time, how much you’ve used your credit limit and how many recent applications you’ve made.
This last one is a doozy. When you apply for credit, lenders do a hard check on your credit file. Too many of these in a short amount of time is a red flag and will negatively impact your credit score.
Your credit score changes over time, which is both good and bad news. You can take steps to improve it, but everything leaves a mark and it takes time to rebuild. Note however, that each financial institution will do its own analysis of your file, of which the credit score is only one component. After all, your score doesn’t reflect your recent salary increase or the inheritance you just received! According to its own guidelines, each institution will place a different value on all the information it collects.
Using the Desjardins credit score
When you log on to AccèsD, you have access to the TransUnion‘s CreditView dashboard. You can consult your score and your entire credit file. It’s a 10-minute process that’s well worth the effort, since it allows you not only to find out your score, but also to validate the accuracy of the information in your credit file. On the dashboard, we also see a graph of our credit score. It’s encouraging when it goes up over time!
The killer question: does consulting the Desjardins credit score affect my credit report?
One of the things that affects your credit score is the amount of inquiries you’ve made recently. Not all inquiries affect your score: it is only the hard credit checks that matter for lenders. For example, if you apply a mortgage, a credit card, and a car loan within a few weeks, chances are your score will be affected.
Desjardins is reassuring; consultating the dashboard and the performing simulations are neither saved nor taken into account. It is therefore not considered an inquiry. The calculation of your credit score is based solely on real information, i.e. a real request from a lender.
What to do if you discover that your credit score is poor?
You consulted My Desjardins credit score and you had an unpleasant surprise? Do you feel that it presents a partial and unfair view of you? Even if you’re right, it’s better to accept the situation and work on improving your money habits. How can you do this? By refining your understanding of the mechanics of credit evaluation.
A credit score of 660 or higher is considered good. However, it is recommended that you aim for as close to 900 as possible. Your AccèsD credit score provides a peek to help you get a better idea of where you stand. The better your credit score, the better your chances are that a financial institution will grant you what you want and offer you better interest rates. On the other hand, a weak credit score, let’s say in the range of 400 or 500, could have a negative impact on your chances of obtaining a loan or credit card.
Behaviours to adopt
Your payment habits, your use of available credit, and having a variety of accounts in your name, such as a mortgage in addition to a credit card, can help you improve your score. For example, you can try to always pay off your credit cards on time and stay under your limit. Specifically, try not to exceed 35% of the total credit you have on all your cards. For your everyday accounts, such as telecommunications and utilities, you can set up automatic payments to ensure you always pay on time.
Behaviours to avoid
It’s good to have credit but too much is as bad as not enough! Be careful not to reapply for credit too often. The more frequent they are, the more desperate you seem! It’s all well and good to build a credit history, but the most important thing is to avoid building a bad history. Before you give in to the temptation of a credit card or line of credit promotion, take the time to think: will you be carrying that new credit card around like a ball and chain six months from now?
A chance to simulate different credit scenarios
What I like most about the AccèD credit score is its simulation tool. It allows us to play with certain variables to estimate our creditworthiness based on our future projects. What would be the impact of a few points up or down on my credit score? Does ordering a new credit card hurt my chances of getting another type of loan later on? Or will my borrowing capacity remain good? The simulator can help us plan the purchase of a house or a new car.
As you may have guessed, I am a Desjardins client. So I tested this simulator for you. One by one, I measured the impact of adding a credit card, increasing or decreasing the balance, transferring it, increasing my credit limit, accumulating payment defaults, canceling my oldest card, adding a loan, adding a request for information, adding a hard credit check etc. From the outset, the simulator covers a wide range of situations.
In my case, adding a mortgage loan would allow me to increase my credit score by a few points, while ordering a new credit card would lower it. In addition, increasing the balance on my cards would also lower my score, and significantly this time! A 90-day default has an equally disastrous effect. If I add two account inquiries, there is no impact on my score. It only starts to drop on the third inquiry.
The pros of the Desjardins credit score
I see three important advantages to the tool offered by Desjardins:
- It’s free, why deprive yourself?
- You can make better decisions
- It dispels credit score myths
Because it’s free, the main advantage of the AccÈD credit score is that it allows you to become aware of your credit score and then act accordingly. It may be thanks to this tool that you will adopt better consumer habits. What’s more, the simulator let’s us see into our potential future and help us evaluate the feasibility of our projects. We can test the concrete impact of a specific behaviour. We are less at the mercy of the guessing and grasping at credit myths.
The cons of the Desjardins credit score
Since it is only updated once a month, we do not see the immediate impact of our actions on our score. Whether it’s a fraud on our file or an improvement in our habits, we have to wait a little while to see how it affects our credit score. The partnership with TransUnion givest this this tool has the same drawbacks as the two credit agencies, whose files are also updated monthly. Therefore, the information is not always accurate and can be wrong, for example if you have moved often. In addition, it’s an uphill battle to get changes made! Desjardins refers us to TransUnion to process any such request.
The credit score has an influence that is sometimes poorly understood, but is certainly a determining factor in the realization of our life projects. This type of tool is therefore absolutely relevant.