Breakdown of a credit score

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Find out what a credit score is, what it means, and why your credit score matters. You'll also learn how a credit score is calculated, and ways you can keep track of your credit score. Oh, and it's Credit Squirrel who will be teaching you all this.

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Breakdown of a credit score

  1. 1. BROUGHT TO YOU BY Breakdown of a CREDIT SCORE
  2. 2. Before CREDIT SCORES • No standard for measuring risk • Up to individual lenders to judge loan applicants
  3. 3. What is a CREDIT SCORE?
  4. 4. A credit score is a number used by financial institutions and credit card companies to determine your risk-level when issuing a loan or a credit card.
  5. 5. The FICO score is the most widely used credit score model in North America. It was introduced in 1989 by Fair, Isaac and Company. It’s also known as the Beacon score in Canada. FICO Fair, Isaac and Company
  6. 6. EQUIFAXTRANSUNION Since each credit bureau uses its own formula, your FICO score can vary depending on which bureau supplies the information.
  7. 7. What does my score MEAN?
  8. 8. Most credit scores are between 350 and 800 350 800
  9. 9. LOW (<550) A low score means you could be denied a loan or a credit card 350 800
  10. 10. 350 800 MIDDLE (550 to 720) You might get approved for a loan, but at a higher interest rate
  11. 11. 350 800 PRIME (720+) Loan approval at the best rates. This is where you want your score to be
  12. 12. Why does my score MATTER?
  13. 13. Renting an Apartment Student Loans Job Applications Car Payments Credit scores can influence:
  14. 14. How are credit scores CALCULATED?
  15. 15. The breakdown of a credit score goes like this: 10%Mix of Credit 35%Payment History 30%Capacity 10%New Credit 15%Length of Credit
  16. 16. Making payments on time boosts your score 35% PAYMENT HISTORY
  17. 17. •How much of your available credit you actually use •The less you use, the better •Maxing out your lines of credit harms your score 30% CAPACITY
  18. 18. A long history of good credit habits raises your score 15% LENGTH OF CREDIT
  19. 19. •Opening a bunch of new credit lines in a short amount of time hurts your score •This includes retail credit cards 10% NEW CREDIT
  20. 20. •Revolving credit (ex. credit cards) •Instalment loans (ex. mortgages, car loans) 10% MIX OF CREDIT
  21. 21. How do I keep track of MY SCORE?
  22. 22. You can request one free credit report per year from each of the major credit bureaus. Visit annualcreditreport.com to get started.
  23. 23. Space out your requests by a few months so that you can check on your credit year-round.
  24. 24. Things to look for on your credit report that influence your credit score: • account openings • account closings • repayment history • mix of credit
  25. 25. Access through a major credit bureau for a fee (usually $15-$25) Get a free estimate (not the same formula as FICO, so it won’t be exact) through creditkarma.com $$$ $0 Need access your credit score? (you won’t find it on your credit report)
  26. 26. Sources: FICO, Forbes, Financial Consumer Agency of Canada. BROUGHT TO YOU BY

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