Your Credit Score

Your Credit Score The credit score is also referred to as a FICO Score and is a mathematical formulae created by Fair Isaac and Company. The credit score is used by most companies to see if you are a good credit risk or not. Equifax and Trans Union will crunch the numbers from the credit report, and spit out a number somewhere between 300 and 900, or even no number or R for Reject.  A score over 680+ is considered excellent. How Scores Are Calculated FACTOR WEIGHT POINTS Payment History Bankruptcies, late payments, past due accounts and wage attachments, collections, judgments 35% 315 Amounts Owed Amount owed on accounts, proportion of balance to total credit limit 30% 270 Length of Credit History Time since accounts opened, time since account activity 15% 135 New Credit Number of recent inquiries, number of recently opened accounts 10% 90 Types of Credit Number of various types of accounts (credit cards, retail cards, mortgage, line of credit, loans etc) 10% 90 POTENTIAL TOTALS 100% 900 How you can improve your credit score 1.    Order a copy of your credit report annually, review it carefully and correct any significant errors: a.    www.equifax.ca b.    www.transunion.ca 2.    Pay your bills on time 3.    If you have a questionable credit history, you should open a few new accounts, use them responsibly, and pay them off on time 4.    Don’t open accounts then don’t use them.  Having 6 or 7 of the same type of credit card does not work in your favour 5.    Have a credit card or instalment loan can help boost your score, so long as you don’t have a high balance 6.    Keep balances low in relation to the available credit.  If the credit limit is say $10,000, keeping the balance below $2,500 (or 25% of the limit) will improve your score, balances over $7,500 (75% of the limit) will decrease the score.  Going over the limit has an even more negative effect 7.    Pay off credit card debt instead of moving it around to lower rate cards.  Moving balances to other credit cards and closing out the old account can hurt the score