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Study: Monitoring Your Credit Score Can Help Improve It Over Time

Rachel Surman

Feb 21, 2018 4 min read

A study conducted by Borrowell, Canada’s leading credit monitoring company, has found a positive relationship between the frequency of credit score monitoring and credit score increase over time.

Drawing from user data, the study also reported that customers with lower initial scores at sign-up tended to improve their scores the most over time.

This is exciting news for the financial technology company. Borrowell’s mission is to help Canadians make great decisions about credit and this research affirms that the company is achieving its mandate. By providing its free credit monitoring service and personalized product recommendations, Borrowell is educating Canadians about credit to help them save money.

What is a credit score?

A credit score is a metric used to assess creditworthiness and it ranges between 300 and 900, depending on the scoring model. Borrowell uses the Equifax Risk Score 2.0. Individuals with higher scores are deemed to be safer borrowers, and are therefore more likely to receive credit.  In addition to higher likelihoods of approval,  individuals with higher scores are more likely to receive lower rates for financial products, such as mortgages or loans. More generally, a credit score represents an overall indication of an individual’s financial health.

How is a credit score calculated?

There are two different credit bureaus in Canada that calculate credit scores: Equifax and TransUnion. A credit score is calculated by weighing various factors on a person’s credit file.

Credit bureaus use the following factors in credit score calculation:

  • Payment history
  • Credit utilization
  • Amount of credit owed
  • Length of credit history
  • Credit Inquiries
  • Credit mix 

While some of these factors carry more weight than others, all are important to having a healthy credit score.

Are there different types of credit scores?

There are multiple types of credit scores and scoring models in Canada. This is because there are two different credit bureaus in Canada, Equifax and TransUnion.

The Equifax credit score received from the Borrowell website is generated directly from Equifax and is called the Equifax Risk Score 2.0 (ERS. 2.0). ERS 2.0 is used by many lenders and institutions when making real-world lending decisions. It is a legitimate and well-established credit scoring model. Borrowell also utilizes ERS 2.0 to guide its internal lending decisions and has found strong correlations between ERS 2.0 and loan performance.

Why doesn’t Borrowell use the Beacon score?

A person has many different credit scores because of the various scoring models of the credit bureaus. Borrowell chose to offer the ERS 2.0 credit score because it represents a more general measure of an individual’s financial health. Moreover, many banks and lenders use this score, supporting its utility as a realistic and helpful score for Borrowell customers.

What is a credit report?

Borrowell has launched free credit monitoring, giving Canadians access to their free Equifax credit report. A full credit report includes an individual’s credit score, along with other credit file details that are used in the calculation of the score, such as active credit lines and balances. The introduction of credit reports adds value to users and is a response to the heightened sensitivity surrounding personal data. Free credit monitoring is beneficial for customers because they can see their full report on a monthly basis, as it allows customers to understand which of their behaviours contributes to credit score change on a month-by-month basis.

Does monitoring a person’s score really help to improve it?

Borrowell’s study found that customers who monitored their score saw greater score increases, relative to customers who did not monitor their score.

With respect to the magnitude of this effect, Borrowell found that individuals who consistently login upon receiving their monthly score refresh saw an average increase of 20 points, relative to individuals who did not login consistently.

Borrowell also found that customers with lower initial credit scores increased their scores by the most points over time.

Methodology and results

Borrowell used the data of 300,000 Borrowell users. For each individual, Borrowell calculated the change in credit score from initial sign-up to most recent score. Borrowell then assessed whether the direction and magnitude of credit score change was related to user engagement, measured by the frequency of credit score monitoring.

Using this methodology, Borrowell found that longstanding users (defined as those who have been using Borrowell for 18-20 months) experienced an average improvement of 20 points. Consumers with lower scores (below 600) experienced an average increase of 43 points.

What has the impact been?

The data shows that engaged users with lower initial scores have received the greatest benefit in the terms of score increase.

A person’s credit score is important to their overall financial well-being. Having a good credit score can help a person save money and improve their credit health. A person’s credit score may be a deciding factor in whether they’ll be approved for a personal loan, car loan, or a mortgage. Ultimately, having a good credit score makes it easier for Canadians to achieve their financial goals.

Understanding and monitoring credit health is the first step to improving it. Borrowell is proud to offer free credit monitoring to help Canadians improve and understand their credit scores – and save money.

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Borrowell® is a registered trademark of Borrowell Inc. All Rights Reserved. The Equifax credit score is based on Equifax’s proprietary model and may not be the same score used by third parties to determine your credit profile. The score provided to you for educational use is the Equifax Risk Score.

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