Factors That Influence Your Credit Score

With banks and financial institutions continuing to tighten lending requirements it is becoming extremely important to maintain a high credit score.  Your credit score is a summary about your financial health and is used by lenders to determine whether you are a credit risk or not.  

So have you ever been curious as to how it is calculated?  Below you will find a list of criteria, put together by the Financial Consumer Agency of Canada, that credit-reporting agencies (in Canada we have two major companies: Equifax and TransUnion) use when determining your score.

1. Payment history.  Including carrying over a balance on your credit card from month to month and missing a payment on any of your debts.

2. Any collection or bankruptcy recorded against you.  

3. Outstanding debts.  Including the limits on your credit cards and spending close to the credit limit. 

4. Account history.  Meaning the length of time you've had credit.

5. Recent inquiries into your credit report.  

6. The type of credit you are using.  Credit cards versus loans.

7. The amount of consumer finance company accounts you have.  Too much credit can sometimes harm your credit score.

8. Not enough recent revolving account information on your report.  Meaning that you should use your credit accounts regularly so that there is data about your payment and spending behaviour.

Not all of these factors carry the same weight.  According to the Financial Consumer Agency of Canada the most import factors are your payment history, whether you have ever declared bankruptcy and the amount of your outstanding credit balances.  

The information affecting your credit score is typically removed from your credit report after a certain amount of time depending on the province/territory you live in and the type of information.  Check out this link Download Www.fcac-credit to see a list of factors used by TransUnion and Equifax and the amount of time that they may affect your credit score.


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