Understanding Your Credit Report and Credit Score

Understanding your credit score

• What is a credit score?
• What factors influence your credit score?
• How long do these factors affect your credit score?
• What does a credit score look like?

What is a credit score?

Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers.

There are many different ways to work out credit scores. The credit-reporting agencies Equifax and TransUnion use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender.

Lenders may also have their own ways of arriving at credit scores. In addition, lenders must decide on the lowest score you can have and still borrow money from them. They can also use your score to set the interest rate you will pay.

What factors influence your credit score?

Credit-reporting agencies and lenders use a mathematical formula to figure out your credit score.

This formula takes into account various factors described in your credit report, such as:

• your payment history (Do you carry over a balance on your credit card from month to month? Have you ever missed a payment on any of your debts?);
  
  
• any collection or bankruptcy recorded against you (Has a collection agency had to collect an unpaid bill from you? Have you ever been bankrupt?);
  
  
• your outstanding debts (What is the limit on your credit card? Is your spending close to your credit limit?);
  
  
• your account history (How long have you had credit?);
  
  
• the number of recent inquiries made about your credit report (How many times has someone asked about your credit report?); and
  
  
• the type of credit you are using (Do you only have credit cards, or do you have a mix of credit cards and loans?).
  
  

These factors do not all have the same weight in determining your credit score. The most important factors are your payment history, whether you have ever declared bankruptcy, and the amount of your outstanding credit balances.

Although other elements such as your mortgage information and any personal inquiries you have made may also be included in your credit report, they usually do not influence your credit score.

How long do these factors affect your credit score?

Information that affects your credit score is usually removed from your credit report after a certain period of time. The length of time that information must stay in your report depends on:

• the province or territory where you live; and
  
  
• the type of information.
  
  

The following charts show how long it takes before information is removed from TransUnion and Equifax credit reports.

The following charts show how long it takes before information is removed from TransUnion credit reports

TransUnion	BC	AB	SK	MB	ON	QC	NB	NS	PEI	NL	Terr.
	Year(s)
Credit transactions (trades) (from the first date of delinquency)	6	6	6	6	6	6	6	6	6	6	6
Judgments (from the reporting date)	6	6	6	6	7	7	7	6	10	7	6
Collections (from the first date of delinquency)	6	6	6	6	6	6	6	6	6	6	6
Secured loans (registered items) (from the date opened)	5	5	5	5	5	5	5	5	5	5	5
Bankruptcy (from the discharge)	6	6	6	6	7	7	7	6	7	7	6
Registered consumer proposal, Orderly payment of debts (from the date satisfied)	3	3	3	3	3	3	3	3	3	3	3
Credit counseling (from the date satisfied)	2	2	2	2	2	2	2	2	2	2	2

The following charts show how long it takes before information is removed from Equifax credit reports

Equifax	BC	AB	SK	MB	ON	QC	NB	NS	PEI	NL	Terr.
	Year(s)
Credit transactions (trades) (from the date of last activity)	6	6	6	6	6	6	6	6	6	6	6
Judgments (from the date satisfied or deposit)	6	6	6	6	6	6	7	6	7 to 10	6	6
Collections (from the date of last activity)	6	6	6	6	6	6	6	6	6	6	6
Secured loans (registered items) (from the filing date)	6	6	6	6	6	6	6	6	6	6	6
Bankruptcy (from the discharge date)	6	6	6	6	6	6	6	6	6	6	6
Registered consumer proposal, Orderly payment of debts (from the date paid)	3	3	3	3	3	3	3	3	3	3	3
Credit counseling (from the date paid)	3	3	3	3	3	3	3	3	3	3	3

Source: Equifax and TransUnion

What does a credit score look like?

Below, you will find links to samples of credit scores from two Canadian credit-reporting agencies: TransUnion and Equifax. If you look at these examples carefully, you will see what kind of information a credit score report contains. This should help you understand your own credit score. The examples shown are for illustration purposes only.