5 Ways Your Credit Score Is Calculated

When you want to check your credit score before applying for a car loan, a mortgage, or an apartment, you contact Equifax or TransUnion and they send you a free report by mail or, for a fee, an instant report online. There you find a number between 300 and 900, a number that tells potential lenders how big of a credit risk you are. That number will determine whether or not you get approved for the loan. or it may affect the interest rate you’re offered.

The lower your credit score, the higher the interest you can expect to pay, as you’re seen as a higher risk borrower. A credit score of 500 is considered “Poor,” a score of 700 is “Good,” and around 800 and higher is considered “Very Good.”

But what goes into calculating this number that can define your financial future? There are 5 primary factors and at David Sklar & Associates, we wanted to walk you through them, as well as how much weight they have on your score.

#1 Payment History (35%)

The most important factor in your credit score is your payment history. Every time you’re late to pay a utility bill, make a mortgage payment, paying your rent, or you miss a minimum payment, your credit score takes into account whether you were over 30, 60, or 90 days late. It also shows if you’ve had any debts go into collections or if you’ve ever faced foreclosure or bankruptcy.

#2 Debt Amounts (30%)

This is how much money you currently owe, whether it’s a phone bill you haven’t paid yet, your credit card balance, or the balance on your mortgage. It shows potential lenders how much of your credit limit you’ve already used as well as what proportion of a debt you’ve already paid back. Having zero debt is not necessarily as good as having some debt that’s paid back regularly, as it shows a pattern of behavior.

#3 Length of Credit History (15%)

This is how long you’ve been using credit and it plays an important role, too. An 18-year-old who just paid off their first credit card balance isn’t going to have the same kind of credit score as someone in their 40s who’s never missed a mortgage payment or a hydro bill.

#4 New Credit (10%)

Opening a new credit account may be necessary, but it’s generally a good idea not to open a new credit card before you apply for a major bank loan. New credit accounts will count against your credit score; use them and pay them down to improve your rating.

#5 Types of Credit (10%)

Your credit score improves when you use multiple types of credit, i.e., not just credit cards, but lines of credit, mortgages, car loans, etc. A Licensed Insolvency Trustee at David Sklar & Associates can teach you what kind of credit mix can help your score.

Insolvency will have a major impact on your credit score as well, and the impact is one of the differences between bankruptcy versus Consumer Proposal, a process which involves agreeing to pay a smaller amount of debt to your creditors because you’re insolvent. A Consumer Proposal will be on your credit history for three afters after you finish paying it off, whereas a bankruptcy takes six to seven years to clear. If you can’t decide which one is best for you, David Sklar & Associates are here for you, to advise you on the path forward. The decisions you make now will affect your credit score for years to come.

If you’ve got a poor credit score and you’re struggling to pay down debt, learn what a bankruptcy trustee can do to get you out of the hole and back on track. You can eliminate your debts and rebuild your credit score with a bit of help, patience, and a financial plan.

Take Your First Step Towards A Debt Free Life

If you are overwhelmed by debt and live in the Toronto area, call us at 416-498-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you. 

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Very professional and fast service! Also, personable!.. they don't treat you like a number, but like a person.From the time I first contacted them, until I was set up there has been not more than 7 days.I dealt with Jackie, she was great!
Jelena Petrovic
18:06 20 Jun 21
I had a great experience with Rhoda at the Mississauga location. Extremely knowledgeable and helpful, she made me feel confident I had made the right choice contacting David Sklar and co. Highly recommend.
Maria Curbelo
19:59 18 Jun 21
I would just like to say thank you to David Sklar & associates for helping me out in this difficult time I was in way over my head, I was introduced to Jackie Stanley, at that moment things got better the calls stop. Jackie was so professional helpful, trusting answered all my calls all my Text, and emails professionally and respectful!! I can’t believe it, and now I’m gonna build my credit rating back up and have my life back Thank You, Jackie Stanley at David Sklar& associates, for doing an outstanding Job!!!!
Mark Simmonds
21:50 16 Jun 21
I am not very good at putting words together especially when your speechless for all the help from such a friendly happy non judgemental team. From being financially stressed and depression hitting all at once I connected with Jackie Stanley💯❤❤ from David Sklar team in a whole other level,she is an absolutely joy to deal with and very informative let me know there is light at the end of the tunnel.. despite my struggle the amazing lady Jackie Stanley was able to put a smile on my face and make me laugh super happy and grateful 🙏I was able to connect with her from David Sklar &Associates team I 💯 percent recommend her (Jackie Stanley) and will continue to recommend her. To any one looking to get out of debt or have any questions belive me when I say you will not be disappointed with Jackie she's such a great person and I'm lucky to have been able to recieve the help and guidance from such a wonderful person and you will be also...look no further no where but up from here ...Thank you So so much Jackie much appreciated
Richelle Barriault
17:57 16 Jun 21
Reached out to Jackie, who was very cordial and professional. Highly recommended.
The Lit Lion
16:54 16 Jun 21
I must admit that I am so glad I called! I spoke to Rhoda Lewis who right away made me feel at ease. She's so caring and supportive I highly recommend her. Thanks to her my life is now on track! Thank you David Skylar & Associates Inc!
Grace Muller
17:55 25 May 21
Very professional and courteous. Jackie was very helpful and understanding. She was happy to answer any questions I had and we were able to process everything quickly with no hassle.
Nicholas Burnett
17:07 19 May 21
I would say my experience with David Sklar was spectacular, they made it really easy for my through the whole process and now 9 months later my bankruptcy is discharged.i would recommend David Sklar to anyone.
HN
23:00 06 May 21
I had a nagging defaulted student loan that was holding me back. There were a few smaller issues that were compounding. The lockdowns really forced me to look into building back my credit and starting fresh.Ashley at David Sklar & Associates at the Keele and Finch location was a blessing. She was thorough in her explanations and answered any concerns I had. She gave me the options and let me decide what was best. After conferring with her, I decided bankruptcy was the best option. She made the process of filing for bankruptcy easy.There's nothing to be afraid of. Stigma attached to bankruptcy but you can reset if you work hard to make it happen.I highly recommend speaking with Ashley if you have any concerns about debt solutions.
A M
14:39 04 May 21
I highly recommend David Sklar & Associates Inc. They helped me with my finances along with the help of Ashley Carter whom assisted me thoroughly throughout the process of my Consumer Proposal. She is very friendly, professional and updated me occasionally through emails. With her tremendous help, I am very thankful to have accompanied someone like her!
Pilar
21:05 28 Apr 21