How Is Credit Score Calculated?

The percentage listed below with each section outline the weight they are given when determining your overall score.

Past Payment Performance - 35%

It will include credit card payment, line-of-credit payment, even your utility bills (if you have set up a credit account with them). Not all bills are counted toward this payment performance.

Credit Utilization - 30%

Low balances on a few cards are better than high balances on just one credit card. It is advised to not exceed 80% utilization of credit balance. In other words, if you have $10,000 balance available, it is wise to not to use up more than $8000 at all time. Even better, do not exceed $5000 at all time if possible.

Credit History - 15%

The longer you have established the credit the better. A credit history that has > 3 year history is good. Always keep the credit cards that you already have for a while. Keep using them, even just for a $5 purchase. It will be good for your overall score.


Types of Credit in Use - 10%

Credit history with traditional banking is better than finance company. You obtain more score on credit cards with banks than with retail stores such as The Bay or Future Shop credit cards. Do not have too many retail cards because it maybe interpreted as potential for future risk.

Inquiries - 10%

Shopping for credit frequently is interpretd as "credit seeker". Each credit inquiry will reduce your credit score by 5 points minimum. It is advised to always ask the company if they are doing a credit check (which is a "hard hit") when you apply for a credit account.



That is why it is adised to let your mortgage broker do the work when shopping for a mortgage. If you shop your deal from bank to bank, each bank will pull a credit report on you, thus lowering your credit score. Brokers pull one credit history and use it for all the financial institutions.



For more information on credit score, visit Equifax at www.equifax.ca