1. What is a Credit Score? How is it Calculated in Canada?
What is a credit score vs. a credit report?
A credit report is a summary of how you pay your financial obligations, and has information based on what you have done in
the past. It lets borrowers see your borrowing activity and payment history. Some of the information is used to determine your credit
score.
Your credit score is a number determined based off of your credit report. It is used by lenders to determine the likelihood that
you will repay your future debt. Your credit score can read anywhere from a low near 300 to almost a high 900.
If someone’s score is 580, it means that “580 people out of 850 are likely to repay their debt.”
If someone’s score is 780, it means that “780 people out of 850 are likely to repay their debt.”
5 specific factors go into determining a credit score. These factors are based on what someone does or doesn’t do with the credit they
already have available. That is why the score changes frequently. See following page / table for a detailed breakdown of the 5 factors.
Is knowing your credit score important?
Your credit score can be determined by both Equifax and Trans Union for a fee. You can also use a free credit score estimator
to find out what your score might be. Some people really want to know what their credit score is. However, it changes frequently so be
prepared. Knowing your approximate credit score is important and can be done for free. It allows you to spot concerns, inaccuracies,
and potential fraud.
How to improve your credit score:
The best things you can do to improve your credit score are to manage your money wisely using a realistic spending plan and to deal
with your debts. Despite what some might claim, there is no quick-fix for factual but negative information on your credit report. Time
and living within your means are what it takes to improve your credit rating. However, in some situations there may be a couple of
things you can do to improve your score more quickly.

2. 5 Factors that Determine Your Credit Score:
Payment History
35%
How Much is Owed
30%
Length of Credit
History
15%
New Credit
Applications
10%
Types of
Credit Used
10%
This is the most
important factor in
determining your credit
sore. Your payment
history reflects all
payments made on all
consumer debt. It shows
if the debt has been paid
as agreed or if there are
delinquent payments. It
also shows if you have
been part of any debt
collections or have
declared bankruptcy,
have liens, or judgments
on the public records
portion of your credit
report.
The older the
information the less it
will impact your score.
Mortgage payments are
not reflected in this
report.
Your current payments
will determine if you can
manage any more
payments in your budget
for addition money you
borrow. If you are close
to maxing out your
credit cards or line of
credits, it means you are
a higher risk for lenders.
There is a greater chance
you won’t be able to
keep up with your
payments.
If you use 75% or more
of your available credit
limits this reflects
negatively on your credit
score. You will struggle
to keep up with
payments if you lose
your source of income.
For someone who hasn’t
had credit for a long
time it is hard to
determine if they will
use their credit
responsibly. Good or
bad most information is
removed from your
credit report every 6-7
years. In order to keep a
credit report active is to
use credit, minimally, on
an ongoing basis.
Time is needed to get a
true picture of how
responsible someone is
with credit.
Your credit score will
reflect how long you
have had credit, how
long each item has been
reporting and if you are
actively using credit
right now.
Frequently applying for
new credit cards is a
sign of financial
difficulty and does not
reflect favourably on
your credit score.
The more credit you
have the harder it is to
keep up on all your
payments.
Part of your credit score
also considers how
many times your credit
has been checked in the
last 5 years. This part of
your credit score will
also evaluate whether or
not you are re-
establishing your credit
history following past
payment problems.
This is the least
significant unless you
don’t have much other
information on your
credit report. Different
types of credit shed light
on how you handle your
money overall.
Consolidation loans
means you have had
troubles paying your
credit in the past.
Revolving credit (such
as credit cards and line
of credits) are more
likely to cause payment
problems than an
installment loan where
you make payments for
a set amount of years
until it is paid in full.