Efficient Mortgage Solutions

What you need to know about your credit score

Source of information: Equifax Canada

What is a credit score?

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 processes.

 How do 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 score.

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.

Because your 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.

 What is used to calculate my score?

  • Payment history - Indicates whether you have made your credit card payments, loan payments and other payments on time
  • Amounts 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 recently opened
  • Type of credit - Considers the type of loans you have - car loans, lines of credit, credit card balances

*Note: Any Mortgage information that may appear in your credit report is not used to calculate your credit score.

 Will inaccurate information in my credit report affect my  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 your issues. Consumer Credit Report Update Form can be downloaded from website  You can fax or mail the completed form to the address below:

National Consumer Relations
Equifax Canada Inc.
Box 190
Station Jean-Talon
Montreal, Quebec
H1S 2Z2
Facsimile: (514) 355-8502


 What can I do to improve my credit score?

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.

Avoid applying 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 loan.

 What if I cannot wait, I need to improve my credit score right now?

Please contact us for a free personal consultation. May be we can help.

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