How Canadian credit score is calculated and credit history work?
Your score is the summary of several things and the most important is credit history. If you try to apply for credit with different banks within short period of time they will check your credit history and this thing alone decreases your score (and might decline your application). If you check/request your score/history on your own it does not affect your score.
While the credit score formula (Beacon score) is kept secret, the score is based on (roughly):
35% is based on repayment history meaning how good you are with repayment of your debt.
30% is based on existing debts, how much you owe.
15% is based on age of accounts, the longer credit accounts have been opened the better. It is a good idea to have 3 different accounts (such as a loan, credit card, line of credit) over 1 year old each.
10% is based on type of debt: bank loans or credit cards impact credit history differently.
10% is based on credit inquiries, how often you apply for credit in the last 12 months.
Factors such as late payments over 30 days, collections, judgments, and bankruptcies have very negative impact on your credit score. A single 30-day late payment can easily drop credit score by 20 points.
Besides the obvious reasons (bankruptcies, collections, late payments etc.) other reasons that can reduce your score are:
-Payments over 30/60/90-days late
-Seeking too much credit in a short period of time (e.g. applying for 4 credit products in one or two months). Numerous applications in the past 6-12 months reduce your score significantly.
-Maxing out credit cards/lines of credit, the utilization ratio should not be exceed 30%-40% (utilization ratio is the ratio between the limit of the credit and the balance). If you reduce the utilization ratio from 80% to 30% your score will improve within relatively short period of time (several weeks).
It is better to have 3 cards with $330 balance and $1,000 limits on each card rather than 1 card with $990 balance and $1,000 limit.
You can request your history report for free but in order to get your score you will have to pay, Equifax and Transunion are not obliged to provide the score for free.
Get your free history reports click on the links
If you want to get your score you can go to Equifax.ca or Transunion.ca
If you are a victim of identity theft contact Transunion (for residents of Quebec tel is 1-877-713-3393 and rest of Canada tel is 1-800-663-9980 ) and Equifax (tel is 1-800-465-7166) as soon as possible.
If you want to know who you should give your SIN to read the article Your Social Insurance Number: A Shared Responsibility! Protect it! Safeguard it!
Aslo please check these infographics Identity Theft - Who's Most at Risk? and Think You’re Not at Risk of Experiencing a Security Breach?