Making the Grade in Financial Literacy, Canadians still have a lot to Learn
Almost half of Canadians (46 per cent) graded themselves with a C or below on their financial literacy according to a recent survey* by Equifax Canada. Survey results also revealed there is a lot of confusion on what goes into a credit report and the importance of maintaining a good credit score.
Millennials (18-34) are more likely to be checking their credit report and more frequently than older Canadians. When asked, 60 per cent of millennials said that they had checked their credit report in the last year and 39 per cent had checked within the last month. Of concern, however, one in four surveyed Canadians (25 per cent) said they have never checked their credit report and the number grows to 32 per cent for those aged 55-64.
“Not checking your credit report regularly isn’t a case of where ignorance is bliss,” said Julie Kuzmic, Equifax Canada’s Director of Consumer Advocacy. “Occasionally there are issues with the data reported to us which could result in inaccurate, incomplete or fraudulent information on credit reports. We cannot help consumers take corrective measures unless they take the time to review their credit history. Ongoing credit monitoring can offer some peace of mind, as well as show early signs of identity theft.”
Cross-Border Comparison: USA versus Canada
Americans are definitely getting the message about checking their credit report and the benefits of knowing their credit scores. In a similar survey, only 9 per cent of U.S. respondents said they had never checked their credit reports. Likewise, more Americans know their credit scores. Only 27 per cent of Americans have never checked their credit scores versus 52 per cent of Canadian respondents.
“Americans definitely have a leg up on Canadians when it comes to knowing their credit scores,” said Kuzmic. “It’s important to know your credit scores because lenders use them to assess the risk of someone not paying them back in a timely manner. A lower credit score often leads to higher rate of interest on the money being lent to you.”
Generally, credit scores range on a scale from 300 to 900, the higher, the better. Over 660 would be considered good by most lenders.
Busting Credit Myths
A significant number of surveyed Canadians incorrectly identified the following factors as negatively affecting credit scores:
- Being denied for credit (54 per cent answered incorrectly)
- Checking your credit report (29 per cent)
- Interest rate on your credit card or loans (24 per cent)
- A change in your salary (23 per cent)
- Participating in credit counseling (14 per cent)
- Motor vehicle record (9 per cent)
- Your gender (5 per cent)
“Checking your credit reports or credit scores does not negatively impact you in any way,” Kuzmic stressed. “And while we’re encouraged that younger adults are checking their credit reports and scores more often, it’s important to note that this younger age group scored lower on their basic understanding of how credit works across the board.”
The good news is, however, at least half of surveyed Canadians correctly identified the following factors as positively affecting credit scores:
- Paying your bills on time (80 per cent answered correctly)
- Amount owed on credit cards and other loans (74 per cent)
- Types of credit you may have (59 per cent)
- Opening new credit accounts (51 per cent)
- Length of time you have been using credit (51 per cent)
*An online survey of 1,524 Canadians was completed between October 12-15, 2018, using Leger’s online panel. The margin of error for this study was +/-2.5%, 19 times out of 20. The U.S. survey referenced above was a blind survey of more than 1,100 American consumers in April 2018. The margin of error for this survey was plus or minus 5 percent.
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