Valley First

Credit Score Basics

Factors that contribute to your credit score

If you’ve ever used credit, then you’ve already got a 'credit score'. This score is a number between 300 and 900 and shows potential lenders how likely it is you’ll pay back the money you borrow—the higher your score, the better your credit is. Maintaining a high credit score is an important investment in your future so that you've got the option to borrow money when you need to. Your credit score is calculated by two different Canadian credit bureaus: Equifax and TransUnion.

Your credit score is calculated using five important factors:

1. What’s your payment history like?

Your ability to repay the money you've borrowed in the past is very important to your credit score—it makes up nearly a third of your final rating. Every time you make a payment to one of your forms of credit (a credit card, loan, line of credit, etc.), your payment is reported by creditors. Creditors also report when your payments are past due, late, or in collections. This part of your score is used by lenders as an indicator of how quickly you'll pay back the money you've borrowed.

2. How much do you currently owe?

If you’re finding it difficult to pay off your existing debts, lenders will find it rather risky to lend you more. If you owe a lot of money to creditors (not counting your mortgage), your credit score will be lowered accordingly.

3. How long is your credit history?

There are ebbs and flows in everyone’s financial history, but time tells the true tale of how well you handle credit. If you’ve been using credit responsibly and sensibly for many years, you're considered more trustworthy and your score will increase. If you just signed up for your first credit card, your score has plenty of room to grow. One thing to remember—most information will be removed from your credit report after 6 or 7 years, and this will impact your score as well.

4. Are you frequently applying for new sources of credit?

If you frequently sign up for new credit cards, loans or other forms of credit, lenders may conclude that you're not able to manage your money. This kind of behaviour can cause your credit score to take a hit.

5. What types of credit have you used?

The kinds of credit you use can say a lot about how you handle your finances and using some types of credit, like unsecured loans and pay-day loans, can even lower your credit score. Credit such as student loans and secured loans are considered less risky.

If you’re interested in seeing your credit score, you can request a copy of your credit report anytime. Visit Equifax or TransUnion for more information. If you need credit advice, contact us online or visit a branch to speak with an advisor.

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Whether you’re looking for more information, or you’d like to let us know how we can serve you, you’ll find our contact information here.
We encourage you to visit an investment advisor at any of our branches for more information on how Valley First can make things simple!