You hear a lot about the importance of your credit score and what it means for your personal credit. But what is it? Simply put, it’s a numerical value that sums up your personal financial history. The number is part of a report created by a consumer credit agency like Equifax or TransUnion. Lenders use the information in the report to determine their risk in offering you credit. Others, including landlords and employers, can access your report as well. You can look at your own report for free, but understanding it is important too. Here’s what you need to know.

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What is a credit score?
You're probably wondering what a good credit score in Canada is. Before we get into that, you should know what a credit score is. In Canada, your credit score is a three-digit number that is based on your financial information and credit history. Lenders use your score to get a sense of how you use your credit and their risk in offering you credit. According to the Financial Consumer Agency of Canada (FCAC), your credit number increases when you show you're managing your credit responsibly and it goes down if you show that you're having problems. The average credit score in Canada by age will fluctuate.
RELATED: 20 Financial terms most Canadians don't know (but should).
RELATED: 20 Financial terms most Canadians don't know (but should).

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How do they figure it out?
How the big consumer credit agencies calculate your score is a bit of a mystery as they have their own methods of calculating them. But generally, your score is based on things like how long you've had credit, the size of your balances, your payment history, how many times you've asked for more credit, the type of credit you have, whether you've had debts sent to a collection agency or have filed for bankruptcy. Remember, lenders may get different scores than when you check your own score. This is because lenders often have different criteria they want to be applied to your financial history.
RELATED: The 15 best travel credit cards in Canada.

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If I don’t have credit will I have a good score?
No. If you don't have a credit history then potential lenders have no idea how responsible you are when it comes to managing your debt. You should create a credit history by using credit cards and small loans responsibly. If you're looking for a new credit card, here are the 10 best credit cards in Canada for 2019.

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How do I check my credit score?
It's surprisingly easy to obtain your credit report. Canada's two biggest reporting agencies, Equifax and TransUnion offer free credit score Canada information as well as newer players like Credit Karma Canada. You can check the websites of Equifax, TransUnion and Credit Karma Canada for details on how you can obtain yours. FCAC also has contact information.

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Does checking credit score lower it in Canada?
No. There are no negatives in checking your score. That's just one of many personal finance myths that you shouldn't buy into. In fact, you should check once a year to make sure that the report accurate. Incorrect information might result in difficulties obtaining credit and could also be a sign of identity theft.

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What is a good credit score?
That depends. As we mentioned, lenders may want to weigh your financial history differently than the default credit report weighting. Generally speaking, higher is better. But there may be other areas that can make you more of a risk to different lenders.

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Who has access to my credit report?
Businesses or lenders that are about to (or have) a financial relationship with you. According to the FCAC, that includes financial institutions, credit card companies, retailers, car leasing companies, employers, landlords, insurance companies and even governments. In most cases, you have to give permission first, but be sure to check your province's rules on this.

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What’s in my credit report?
Your credit report includes not only your personal information like name, date of birth and address, but also previous addresses and past employers. Pretty much anything relating to your personal credit history is included, from bad cheques to inquiries from other lenders. If you have a good rating, you might want to look at one of the best cash back credit cards in Canada.

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Is the information permanent? What about my score?
Yes and no. Some information is updated constantly although there is usually a 30-90 day lag. As for how long the information is kept, it can range from three years to six or more. It's a good idea to check every year as your score is constantly changing.

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What if I have a low score?
It means that you could have difficulty obtaining a loan, mortgage or lease and, in many cases, you'll be charged a higher interest rate. A low credit score is a red flag for landlords and could make renting more difficult. It could even cost you that job you've applied for.
If you want to improve your score, check for errors and fix them. You should also get those debt levels down to between 30 and 50 percent of your limit. And most of all, treat debt with respect and only use it when you know you'll be able to pay it off. Here are some ways to reduce credit card debt, according to Canadian finance experts.
If you want to improve your score, check for errors and fix them. You should also get those debt levels down to between 30 and 50 percent of your limit. And most of all, treat debt with respect and only use it when you know you'll be able to pay it off. Here are some ways to reduce credit card debt, according to Canadian finance experts.
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