What Influences Your Credit Score in Canada?
What Influences Your Credit Score in Canada?
Posted on February 3, 2021
If you’re trying to rebuild your credit or are considering a car loan in Milton anytime soon, understanding factors that impact credit score can help. That’s what we’re going to discuss today.
Knowing what goes into a credit score can help you build or rebuild your score ahead of a loan application. The higher your score, the higher the chances of loan acceptance. It’s one of the few things around credit that’s simple!
What’s in a credit score?
There are five main considerations that go into your credit score.
They are:
- Payment history – This has the largest influence over your score and makes up around 30% of it. Payment history is exactly that. Have you paid your debt on time? Ever missed a payment? They will both factor into your score.
Never miss a payment and your score will climb accordingly.
- Credit utilization ratio – Your credit utilization ratio is the total amount you owe. It is calculated by dividing the amount of credit you are using by the total amount of credit you have available. This also makes up around 30% of your credit score.
The ‘ideal’ ratio is around 30% of available credit being used.
- Credit history – The length of your credit history makes up around 15% of your credit score. The longer your history, the higher your score. It takes into account the age of credit accounts, age of your newest form of credit and the average age of all credit accounts.
Using credit sparingly but carefully can help build a positive credit history.
- Credit mix – Credit mix is the variety of credit you’re using. That means a mixture of Milton car loan, student loan, mortgage, car loan and so on. This calculation uses a model to decide whether you have a good credit mix or not to make up around 10% of your credit score.
Essentially, using a range of credit sensibly can help your credit mix.
- New credit applications – The number of new or recent credit applications makes up a further 10% of your credit score. Too many credit applications in a short time and it will negatively impact your score.
Always use preapprovals for checking access to credit. Only ever apply for credit you know you’re going to use.
As you can see, there’s a lot that goes into making up a credit score. These are based on FICO and Experian but TransUnion will use something similar.
If you’re planning on accessing finance at any point in the future, know what does and what doesn’t impact your credit score can play a pivotal part in whether you are accepted or not.
We hope it helps!
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