What is a credit score?

Your credit score is a number that defines your credit rating. Your credit score typically ranges from 300 to 900 and is based on the information in your credit report. The table below shows the various ratings:

Your credit report provides information including your payment history, the amount of debt you have, and the length of your credit history.

Why is it important?

Your credit score is important because it helps to determine your “credit-worthiness” or how likely you are to qualify for credit cards, loans, and other forms of borrowing.

A higher credit score indicates that you have borrowed responsibly in the past; paying off your debts and demonstrating that you are a low risk for future borrowing.

With a better credit score, you are able to access improved loan rates and terms, due to the likelihood that you will fulfill your financial obligations.

Where do I get my credit score?

In Canada, there are two major credit reporting agencies:

You can request your credit score from either agency and purchases can be made online, in-person or by mail.

(Pro tip: some banks and credit unions offer credit scores for free to their customers, so it is always worthwhile to check with your financial institution.)

Each credit agency will provide a slightly different credit score, as they each use their own proprietary data models for their calculations. It can be worthwhile to obtain your credit score from each agency, in order to create a comprehensive view of your credit situation.

It is essential to note that banks or other lenders will also have their own models for determining your credit score.  Lenders and creditors can use additional information available to them, beyond your credit score, to determine whether to grant you credit.

Your score from Equifax or TransUnion is only a guide as to how actual lenders will view your application for credit.

How is my credit score calculated?

Your credit score is affected by 5 main factors as shown below:

Payment History (35%) – reflects your ability to make suitable payments in a timely manner

Debt (30%) – reflects the amount of outstanding debt your currently have against the amount of debt you have access to

Credit Length (15%) – reflects the amount of time you have held a form of credit, the longer the better

New Inquiries (10%) – reflects the number of times you have applied for credit recently

Diversity (10%) – reflects the number of different credit accounts you have open, the more the better

How does my credit score impact securing a mortgage?

Contact Ashab today @ 647-295-5219 to discuss your credit score and the mortgage rates available to you.