Your credit score: Decoded

While credit scores seem to be arbitrary, they're actually determined according to a rigid mathematical formula. Every debt, credit card and late payment is weighed differently -- and these weights differ between TransUnion and Equifax. In general, Equifax Canada weighs its components something like this:


Payment History -- 35%
This typically involves recent payments that are more than 30 days late, as well as any collections, judgements or bankruptcies


Outstanding Debt -- 35%
This includes the number of creditors owed, credit card balances and allocated limits. A maxed out credit card will have a deeper impact on your credit score than a card with a $200 balance


Credit Account History -- 15%
This refers to the length of time your accounts have been open. If you've been using a credit card for ten years and have been paying it off on a regular basis, this actually has a positive effect on your overall credit rating


Recent Inquiries -- 10%
Every time you apply for a loan or credit card, lenders have to access your credit report to see your score and assess your credit worthiness. Too many of these in a 12 month period -- say, if you were shopping around for a mortgage -- can reduce your rating.


Types of Credit -- 10%
If you have a mix of different types of credit -- including revolving credit, such as credit cards and lines of credit, and installment loans that you pay monthly, such as student loans -- the better your credit picture will be.

Curious about your credit score? Order a copy HERE!

-courtesy of Axiom Mortgage Partners