breakdown of a credit score · 2020. 2. 12. · loans credit scores can in uence: ... you can check...
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Breakdown of aCREDIT SCORE
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BeforeCREDIT SCORES• No standard for measuring risk• Up to individual lenders to judge
loan applicants
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What is aCREDIT SCORE?
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A credit score is a number used by financial institutions and credit card companies to determine risk level when issuing you a loan or a credit card.
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The FICO® Score is the most widely used credit score model in North America.
It was introduced in 1989 by Fair, Isaac and Company, now Fair Isaac Corporation.
It’s also known as the Beacon score in Canada.
FICOFair Isaac Corporation
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EQUIFAX®TRANSUNION®
Since each credit bureau uses its own formula, your FICO Score can vary, depending on which bureau supplies the information.
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What does my scoreMEAN?
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Most credit scores are between 300 and 850.
This chart is based on the FICO Score model.
300 850
580670
740
800
EXCEPTIONAL
VERY GOOD
GOOD
FAIR
POOR
300 850
580670
740
800
EXCEPTIONAL
VERY GOOD
GOOD
FAIR
POOR
300 850
580670
740
800
EXCEPTIONAL
VERY GOOD
GOOD
FAIR
POOR
300 850
580670
740
800
EXCEPTIONAL
VERY GOOD
GOOD
FAIR
POOR
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A low score means you could be denied a loan
or credit card.
300 850
580670
740
800
EXCEPTIONAL
VERY GOOD
GOOD
FAIR
POOR
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A score in this range means you might be
approved for a loan, but at a higher interest rate.
300 850
580670
740
800
EXCEPTIONAL
VERY GOOD
GOOD
FAIR
POOR
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This is where you want your score to be for loan approval at the
best rates.300 850
580670
740
800
EXCEPTIONAL
VERY GOOD
GOOD
FAIR
POOR
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Why does my scoreMATTER?
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CarPayments
Job Applications
Renting anApartment
Student Loans
Credit scores can influence:
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How are credit scoresCALCULATED?
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The breakdown of a credit score goes like this:
10%Mix of Credit
35%Payment History
30%Capacity
10% New
Credit
15% Length of
Credit
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Making payments on time boosts your score
PAYMENT HISTORY (35%)
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• How much of your available credit you actually use
• The less you use, the better
• Maxing out your lines of credit harms your score
CAPACITY (30%)
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A long history of good credit habits raises your score
LENGTH OF CREDIT (15%)
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• Opening a bunch of new credit lines in a short amount of time hurts your score
• This includes retail credit cards
NEW CREDIT (10%)
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• Revolving credit (e.g., credit cards)
• Instalment loans (e.g., mortgages, car loans)
MIX OF CREDIT (10%)
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How do I keep track ofMY SCORE?
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You can request one free credit report per year by mail from Equifax and TransUnion
If you can’t wait for a free report by mail, you can always get an instant credit report online from Equifax or TransUnion for approximately $15.
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Space out your requests by a few months so you can check on your credit year-round.
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Things to look for on your credit report that influence your credit score:
• Account openings
• Account closings
• Repayment history
• Mix of credit
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Access through Equifax or TransUnion for a fee (usually $20–$25)$$$
Need access to your credit score?(You won’t find it on your credit report)
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Sources: FICO, Forbes, Financial Consumer Agency of Canada
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