What you need to know about your credit score
Source of information: Equifax Canada
A credit score is
a statistical formula that translates personal
information from your credit report and other
sources into a three-digit score. For example,
when you fill out a loan application, pieces
of information from the application along with
information from your credit report will be
used to compute a score that indicates to the
lender the statistical probability that you
will become delinquent on the loan.
Some scores that
lenders use are based strictly on the data in
your credit report; these are known as "bureau
scores". The most widely-used bureau scores in
Canada were developed by Fair, Isaac and Co.,
headquartered in San Rafael, California.
It is important
to understand that a credit score is only one
criterion that a lender will use in making
decisions. For example, in mortgage lending,
the lender will take into account the property
being purchased and the homeowner's equity.
Many lenders look at their relationship with
the customer, which may include other
financial services. Each lender will have its
own policies and you should feel comfortable
asking a credit institution about these. Our
work with credit grantors has shown us that
most lenders want their customers to have a
better understanding of their lending
lenders view my score?
Your credit score
is an important indicator of your
creditworthiness. In general, the higher your
score, the lower the probability that you will
become delinquent on credit extended to you.
And while many lenders use bureau scores to
help them make lending decisions, each lender
will base its decision on more than just the
Lenders use your
credit score to determine if you are a good
candidate for credit and likely to pay your
bills. In the event of bankruptcy, it will
also help them determine what type of
repayment plan is best for you.
credit report is updated every day, your
bureau score is recalculated continuously. So
your credit score from a month ago is probably
not the same score today.
history - Indicates whether you have made
your credit card payments, loan payments and
other payments on time
owed - Compares how much you owe to your
credit limits with various lenders
- Length of
time in file - Indicates how long you have
had credit accounts
- New credit
- Shows how often you are looking for new
credit and how you handle accounts you have
- Type of
credit - Considers the type of loans you
have - car loans, lines of credit, credit
Mortgage information that may appear in your
credit report is not used to calculate
your credit score.
This will depend
upon what information is wrong. If the
inaccurate information is used as part of the
score calculation, your score will be
affected. The majority of information used in
the score calculation is found in the Credit
Information, Public Record and Collections
sections of your credit report.
We encourage all
consumers to request and review their credit
report on a regular basis. By doing this, you
can ensure that your report contains
information that accurately reflects your
credit history. You have the right to dispute
any discrepancies by immediately notifying the
credit reporting agency. We want to ensure
that your credit report is as accurate as
possible and will work with you to resolve
Consumer Credit Report Update Form
can be downloaded from website
www.equifax.ca. You can fax
or mail the completed form to the address
Equifax Canada Inc.
Facsimile: (514) 355-8502
Pay all of your
bills on time. Paying late, or having your
account sent to a collection agency has a
negative impact on your credit score.
Try not to run
your balances up to your credit limit. Keeping
your account balances below 75% of your
available credit may also help your score.
for credit unless you have a genuine need for
a new account. Too many inquiries in a short
period of time can sometimes be interpreted as
a sign that you are opening numerous credit
accounts due to financial difficulties, or
overextending yourself by taking on more debt
than you can actually repay. A flurry of
inquiries will prompt most lenders to ask you
why. However, most scoring formulas will not
penalize you if, for example, you are shopping
for the best mortgage rate or the best car
What if I cannot wait, I
need to improve my credit score right now?
contact us for a free
personal consultation. May be we can help.