56% of Canadians have never checked their credit score

As lenders move toward more automation, a consumer’s credit score is more important than ever

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Rachel-MatthewsSAN FRANCISCO, CA, Mar 6, 2015/ Troy Media/ – According to a report released by the Bank of Montreal on February 27th, 56 per cent of Canadians say they have never checked their credit score. The goal of the bank’s survey, conducted by Pollera, was to gauge Canadians’ overall knowledge level of credit and how it impacts their personal finances. The results indicate that knowledge level is lower than expected.

Fifty-two per cent of respondents stated that they were unaware of what could be considered a good credit score. When asked what would be considered a good credit score, 21 per cent of respondents gave a number below 600. Industry experts consider a score of 700 or better to be a good credit score. Thirty-one per cent did not know how to improve their score and only 20 per cent check their score at least once per year.

U.S. hyper focused on credit score

While the report did not offer any insight into the reason that participants’ knowledge of credit was so poor, a number of factors are likely contributors.

Lenders in the United States arguably focus more on credit than in any other country in the world. It’s not unusual for an applicant to be denied on the basis of their credit score alone. This hyper focus on credit score leads to the production of volumes of information pertaining to credit scores, with the content being catered to the credit system in the United States.

credit score
Only only 20 per cent of Canadians check their score at least once per year

While this information is somewhat applicable to other countries, the credit scoring systems used around the world are not identical. The score range in Canada is 300 to 900 whereas the scale in the United States begins in the low 300s and tops at 850.

These variations, while relatively minor, are different enough to cause confusion among consumers. To add more confusion to the issue, most credit rating systems outside of North America are quite different. This may cause the average consumer to assume the differences between scoring models in the U.S. and Canada are minor relative to the rest of the world and are, thus, unimportant.

While it’s quite clear that consumer credit information from the U.S. does impact consumers in Canada, there is little impact on the rest of the world. Credit reporting is vastly different in practically all other economically powerful countries.

  • Australia – Veda Advantage is the primary provider of credit file data. Only negative information is reported, such as a default under a credit contract.
  • Austria – Various credit bureaus maintain blacklists. If consumers fail to pay their obligations, they will be added to a blacklist. Lenders use the information from these blacklists when making credit decisions.
  • Sweden – Consumers are listed as being in either good or bad standing. There is no numerical scoring model.
  • United Kingdom – A logistic regression model is often used to determine if a potential borrower is a good or bad credit risk. There is no central credit scoring agency. Experian, Equifax, and Call Credit operate within the country; however, their models are quite different from North America.

Germany is the only large country with a credit model similar to those in North America.

Given that many of the issues are related to lack of or conflicting information, consumer education is the best course of action. Canadian consumers need information that is relevant to them and targeted to their needs. They need to understand that, while the Canadian credit rating system is similar to the United States, there are key differences.

They also need to understand how late and missed payments affect their credit score. They should also be informed that they can request their credit report for free at any time and they should do so regularly. They should be reviewing their report for any inaccurate information. If inaccuracies are found, they should contact the creditor and the credit reporting agency to dispute the information.

Talk to a credit score repair agency

If the consumer is unable to successfully resolve the inaccuracy, there are credit repair agencies that will advocate on their behalf. These credit repair agencies are doing a good job of reaching consumers, especially those in younger generations who tend to be less knowledgeable about their credit. For example, Creditrepair.com uses its Facebook page to educate consumers about their credit and their options for credit repair.

As lenders move toward more automation and less personalization, a consumer’s credit score will become more important than ever. It’s important that credit agencies and businesses that use this credit information educate consumers with information specific to the Canadian market.

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