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  • Writer's pictureBrandon Nishi

Decoding Credit Scores: How They're Calculated

Understanding the intricacies of credit scores is a vital aspect of securing your financial health and building a stable economic future. In this comprehensive guide, we'll delve into the factors that contribute to your credit score and explore the nuances that differentiate various credit scores. So, buckle up as we embark on a journey to demystify the world of credit scoring.

How Credit Scores Are Calculated

Understanding how credit scores are calculated can help you maintain or improve your score. Here's a breakdown of the main factors:

1. Payment History (35%)

This is the most critical factor. It includes your record of on-time payments, late payments, and any history of defaults, bankruptcies, or accounts in collections.

2. Credit Utilization (30%)

This measures how much of your available credit you’re using. A lower ratio of used credit to available credit is better for your score.

3. Length of Credit History (15%)

This considers the age of your oldest account, the age of your newest account, and the average age of all your accounts. Longer credit histories generally contribute positively to your score.

4. Public Records (10%)

Public records, such as bankruptcies or tax liens, can negatively impact your score. Keeping your financial record clean helps maintain a higher score.

5. Inquiries (10%)

Hard inquiries, or credit checks made when you apply for new credit, can lower your score slightly. Multiple inquiries in a short time may indicate financial distress, which can further impact your score.

Tips to Improve Your Credit Score:

  • Pay your bills on time.

  • Keep credit card balances low.

  • Avoid opening multiple new accounts in a short period.

  • Regularly check your credit report for errors and dispute inaccuracies.

For more detailed information, visit Equifax Canada.



Questions or concerns? Contact me today!

P: (604) 353-5809


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