Understanding my credit score

Your credit score is a mathematical formula that allows a potential lender to quickly evaluate your credit behaviour. The information for your credit score is taken from a credit report.

Your credit score will go up or down based on several factors:

  • Payment history: Do you make your payments on time? Do you ever miss payments?
  • Current debt: Do you carry large balances on your credit cards or line of credit?
  • Established credit history: When did you start “borrowing” and making payments?
  • Inquiries for credit: How many credit applications have you filled out? Are you applying for too much credit?
  • Types of credit: Do you have different types of credit – credit card, auto loan, personal loan, line of credit?

Raising your credit score:

You have an important role to play in your credit score and you can influence your score by making responsible credit choices:

  • Pay your bills every month and pay them on time.
  • Don’t carry high balances on your credit cards, even if you’re making the minimum payments every month. Outstanding debt influences your credit score.
  • Avoid applying for retail cards just to save 20% on your purchase (unless you plan on using the card regularly and paying down the balance). Every inquiry for credit is kept on your credit report, and too many can cause a potential lender to wonder why you suddenly need so much credit.
  • Remember that it takes time to establish a credit history. Open a credit account and keep it open to establish a history of credit use. Establish a pattern of making your payments on time.
  • Review your credit report at least once a year. This will help you catch errors, fraud or identity theft that could affect your ability to obtain credit.

Equifax Canada (www.equifax.ca)
TransUnion Canada (www.transunion.ca)

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