It can be very daunting when it comes to figuring out one’s financial responsibilities. So many numbers to look at, so many specifics to follow. I was under these similar circumstances not too long back. However, once I started learning the basics, slowly but surely, I gained enough confidence to manage my finances. Along the way, I learned the importance of a credit rating. A credit score is essentially the culmination of all the borrowings and repayments you have made in the past based on mediums that allow you to borrow, most commonly credit cards.

What does it mean to have a credit rating? A credit rating is an indication of how financially responsible you are as an individual. In Canada, an individual receives a score between 300 and 900. If you get a high score, you are doing great! If you have a low score, there is some room for improvement. For instance, if you have a score between 700 and 900, this indicates that you have healthy financial history in relation to borrowing and repaying in a timely fashion. If however you receive a score between 400 and 500, you might want reflect upon your repayment habits, limiting the number of credit cards you have, or establishing your own credit identity.

But why is it important have a good credit rating? A good credit rating is a reflection of one’s character. The score is a part of your financial profile, and having a good score allows other individuals to see you as reliable and responsible, giving them confidence on repayments and trusting you with money. Landlords, insures, lenders, and employers are some examples of individuals/institutions that will look at your credit rating. The credit rating is available to both the individual and the institution, allowing both parties to use the information to form a deal. Someone with a higher credit rating, usually above 750 or 800, also has the possibility to negotiate with an institution for better terms, such as lower interest rate or a longer lease of a loan. In contrast, a lower credit score means an individual will have less options in what financial assistance is available to them. The benefit of having a good credit rating score can determine what financial decisions and possibilities you can make in the future. Some examples include being able to qualify for a mortgage, settling down in an awesome job, leasing a vehicle or evening getting a loan. If you have a good and consistent credit history, lenders will trust you more and they will see you as financially responsible.

Building and maintaining a good credit rating is an important foundation to building your “credit-worthiness” as an individual, opening up opportunities for future investments and growth. You can start by building a credit history by acquiring a secure credit card from an established financial institution. You can maintain it by paying your bills on time or as early as possible, keeping low balances on all your accounts, and keeping your accounts open to showcase your history.


Huzaifa Mohamedbhai

Author Huzaifa Mohamedbhai

More posts by Huzaifa Mohamedbhai

Leave a Reply