How is my credit score calculated?
The score is a three-digit number that lenders use to help them make decisions. Lenders use scores to determine whether or not to grant credit, and if so, how much credit and at what rate. A higher score indicates that the individual is a lower credit risk.
To calculate a score, numerical weights are placed on different aspects of your credit file and a mathematical formula is used to arrive at a final credit score. TransUnion calculates your credit score based on many factors in your credit history and payment behaviour, including but not limited to:
• Your track record for repaying your loans and credit card balances
• How much money you currently owe on your credit accounts
• How long your accounts have been open
• The different types of credit you use or credit mix
• How much credit you use compared to the amount of credit you have available
• How often, and how recently you have applied for credit
While the overall purpose of credit scores is universal, each lender will use his or her own criteria to measure an individual's credit worthiness.
It can be confusing when your score seems high but you are denied credit. Chances are you're not looking at the same score as your bank or finance company or they had other contributing factors involved in their decision, such as previous history with the institution. Subscribers don't always work with both credit reporting agencies in Canada, so the information included in one report might be slightly different from the other. Some lenders also use their own internal credit scores when evaluating an application. The only way to find out about how they measure your creditworthiness is to ask the individual lender.
What is a good score?
Typically, the higher the score the better. Each lender decides which credit score range it considers a good or poor credit risk. The lender is your best source of information about how your credit score relates to their final credit decision. Your credit score is only one component of the information that lenders use to evaluate credit risks.
What affects my credit score the most?
Your payment history is typically the most important aspect of your credit score. It shows how you've managed your finances. Your credit history is also very important, as it demonstrates how long you've been managing your accounts, when you made your last payments, and any recent charges.
