Paul LeFevre, director of operations of Equifax Canada Inc., said coming up with the credit score is a trade secret but he can provide a little insight into what goes into it.
About 35% of the score is based on payment history and looks at late payments and severity of delinquencies. Another 30% of the score is utilization of your credit, basically how much of your credit have you used.
“You could go over your limit at the store and the payment will go through but that will have a significant impact on your score,” said Mr. LeFevre.
The next 15% is the length of your credit score history. The type of credit you have, including how many retail cards or credit cards you have, makes up another chunk of your credit score. Those cards can have a high impact because they come with higher risk than your car or home.
“You have to have your home and you need to get to your work [so you are more likely to pay those debts],” says Mr. LeFevre.
The final component is the history of background checks on your credit. People who seek credit a lot are considered higher risk and that can account for up to 10% of your score.
“Applying for a product won’t kill your score on its own” he says, adding the best advice he can give any consumer who currently can’t get a home mortgage is “pay every bill on time and pay down or eliminate all existing balances.”