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The Importance of Good Credit

General Terry Kilakos 15 Nov

In the world of finance, especially in sectors like real estate and mortgages, the importance of good credit cannot be overstated. Good credit isn’t just a number; it’s a gateway to financial opportunities, allowing access to better loan terms, lower interest rates, and a smoother path in real estate transactions. Preserving good credit requires a strategic approach, combining financial discipline with a deep understanding of how credit works.

Understanding Credit Scores

Credit scores are numerical expressions based on a level analysis of an individual’s credit files. In Canada, credit scores range from 300 to 900, with higher scores representing better creditworthiness. These scores are crucial in determining the terms of credit, including mortgage loans, personal loans, and credit card applications. A good credit score (typically 700 or above) suggests that you are a low-risk borrower, often leading to more favorable loan conditions.

Factors Influencing Credit Scores

Several factors influence your credit score. Payment history, which includes the timeliness of your credit payments, has the most significant impact. Credit utilization, or the amount of credit you use relative to your credit limit, is also crucial. Length of credit history, types of credit used, and recent credit inquiries are other contributing factors.

Why Good Credit Matters

  1. Lower Interest Rates on Loans and Credit Cards: A good credit score can qualify you for lower interest rates, which means you’ll pay less over time for any borrowed money.
  2. Approval for Higher Limits: You’re more likely to be approved for higher credit limits, which can be beneficial in managing larger expenses or investments.
  3. Easier Approval for Rentals and Mortgages: Landlords and mortgage lenders often check credit scores as part of their decision-making process.
  4. Better Car Loan Terms: Good credit can lead to better terms on car loans, either through lower interest rates or more favorable repayment terms.
  5. Insurance Benefits: Some insurance companies use credit scores to determine premiums, with better scores often leading to lower rates.

Preserving Your Good Credit

  1. Pay Bills on Time: Late payments can significantly impact your credit score. Setting up automatic payments or reminders can ensure you always pay on time.
  2. Keep Credit Utilization Low: Try to use less than 30% of your total credit limit. High credit utilization can be a red flag to lenders, as it may indicate financial overextension.
  3. Regularly Monitor Credit Reports: Regularly checking your credit report can help you spot errors or fraudulent activities. In Canada, you can request a free copy of your credit report once a year from credit bureaus like Equifax and TransUnion.
  4. Limit New Credit Inquiries: Each time you apply for credit, a hard inquiry is made, which can temporarily lower your credit score. Limiting the frequency of new credit applications can help maintain your score.
  5. Diversify Your Credit: Having a mix of credit types (like a mortgage, car loan, and credit card) can positively impact your credit score, as it shows you can manage different types of credit responsibly.
  6. Long-Term Strategy: Maintain older credit accounts and avoid closing them. A longer credit history can positively impact your score.
  7. Manage Debt Wisely: If you have existing debt, creating a strategy to pay it down can improve your credit score. This includes prioritizing high-interest debts and considering consolidation if it benefits your financial situation.


Maintaining good credit is a continuous process that requires diligence and financial discipline. In the realms of mortgage and real estate, a good credit score is not just a number—it’s a reflection of your financial health and a key factor in securing favorable terms in financial transactions. By understanding how credit scores work and adopting practices to preserve and improve your credit, you open doors to a multitude of financial opportunities and a more secure financial future.

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