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Key factors of your credit score

Credit Scores
Credit ScoresRyan / Fin Images

Credit Scores

Your credit score is based on all the information in your credit record. If you have a high score, you are seen as a low risk for obtaining credit. You are also categorized as “Excellent” or “Poor” depending on your repayment history.

Your credit score is a number generated by a mathematical algorithm based on the information contained in your credit report as compared to the millions of people in the CRA database. The number that results is the likelihood that you will repay any loans or credit that is granted to you.

The score consists of numbers ranging from 300 to 850. Most people score between 600 and 800. This is the number needed to be considered a good risk for credit. The higher your score, the better chance you have of obtaining a loan and getting a good interest rate.

Key factors of your credit score:

1. How you pay your bills. This accounts for 35% of your score and is based on your history of paying your bills on time. Late or missed payments lowers the score.

2. Amount of money you owe and the amount of credit you have available. If all of your credit cards are up to their available limit, you are a poor risk and will probably be turned down for a loan or credit. People who don’t use their credit cards don’t have an adequate credit history. In order to have a healthy credit report, your outstanding balances must be somewhere in the middle. This accounts for 30% of the credit score.

3. The length of your credit history counts for 15 % of the score. The longer you have had credit with a good record of repayment, especially if it has been with the same companies or banks, gives you higher points.

4. A mix of credit involving bank loans and revolving credit will give you more points as well. This is worth 10% and if you do have a mix of credit it will go better, because you will be seen as a person who knows how to handle money.

5. New credit applications count for 10% because this shows how many applications you are filling out. A lot of applications is seen as alarming because many people look for all avenues of help before they declare bankruptcy.

The table on this page will help you get an idea of where you and your credit fits as it is related to the majority of people in the CRA database.