November signals the start of holiday music at retailers, colourful leaves and a dip in autumnal temperatures – and for the past seven years, Financial Literacy Month. Led by the Financial Consumer Agency of Canada, Financial Literacy Month aims to improve the financial literacy and financial well-being of Canadians.
For Toronto-based fintech start-up Borrowell, promoting financial literacy – part of their mission statement – is a year-round endeavour. “Financial Literacy Month is important because, for us, every month is Financial Literacy Month,” according to CEO and cofounder Andrew Graham. Financial well-being begins with knowledge of one’s credit score. Your credit score can be described as the thermometer to measure your financial health.
One of the country’s leading fintech innovators, Borrowell is committed to helping their clients better understand their credit health by offering them the option to monitor their credit scores on a monthly basis – the first company in Canada to do so for free. They also provide free educational tools, such as a seven-week email course, to help customers learn and understand what they need to do to improve their score.
“Our mission is to help Canadians make great decisions about credit and this means helping people to first understand their credit,” Graham said. “A credit score isn’t just a number – it affects many things, including mortgage rates, insurance rates, even whether someone gets their dream apartment. Having a good credit score can make these things easier and can help Canadians save money in their everyday lives.”
Credit scores range between 300 and 900 and are used by lenders such as banks to determine liability when providing loans. In other words, a credit score is a reflection of how you manage debt and determines your credit-worthiness. The three-digit number is based on a mathematical formula that translates information in a credit report using factors such as the frequency of late credit card and bill payments, how often one uses their credit card(s), among others. The average Canadian scores around 600. Anything above 650 is deemed to be “low risk.”
Credit utilization, or how much available credit a customer is using each month, makes up 30% of one’s credit score, according to Graham. The chief executive’s tip to increase your credit score is to use less than 30% of your available credit to keep utilization low. Knowing your credit score is the first step to improving your financial well-being, but like a visit to the gym or the dentist, monitoring your score over time is the key to improving your credit health.
Recent Borrowell data found that customers who monitor their score saw greater improvements in their score than those who only checked once in a while – advantageous for those looking to build better credit. Their data also revealed that those who come to Borrowell with a lower score stand to improve their score the most – by as much as 48 points, Graham shared. The Financial Consumer Agency of Canada recommends “vigilant, ongoing monitoring of one’s credit profile” and that Canadians order their credit report at least once a year to protect against identity theft. This is more important than ever in light of recent cases of personal data breaches, according to the federal agency.
Not only can Borrowell help with ongoing monitoring beyond Financial Literacy Month, it also offers tailored product recommendations based on each customer’s unique credit profile to help improve their scores. “We’re always making improvements to what we offer and looking for ways to offer deeper insights to our customers. We have some exciting things coming in the months ahead. Stay tuned!” Graham said.