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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Ready to live debt free?

I cannot emphasize enough how thankful I am for Jackie Stanley's help with filing for bankruptcy.All of us dread being put in this position and we have a million questions about the process but trust me Jackie makes it so easy for you that you don't have to do anything yourself!She is very kind and friendly and puts you at ease right away. She emphasizes with you and let's you know it's not your fault.Most importantly when you leave that first meeting you will not believe the load that is taken off your shoulders. You can actually feel it!You are a godsend Jackie and I can't thank you enough!!I hope you are highly valued there as much as you are by me!
Sue Murray
18:45 05 Dec 21
Putting together and executing a Consumer Proposal can be daunting, that is unless you work with Cori Naron at David Sklar & Associates Inc. Cori's advice and support has been instrumental over the past five years. Thank you Cori!!
Barry Kuntz
20:37 01 Dec 21
I’m very happy with the services I received for Jackie Stanley who helped me get my finances in order. It was a quick and easy process & all of my questions were answered.
Amanda Frappier
01:18 19 Nov 21
I have had the privilege of being supported by Jackie at David Sklar Associate. She was very helpful, very professional and very friendly. She gave me the help I need. Thank you Jackie for your help.
Alex Taylor
22:03 17 Nov 21
Got my probe solved, great service
arny raposo
17:02 11 Nov 21
Jackie at Daivid Sklar and Associates is such a pleasure to work with. She explained everything in great detail and is always there when I have a question or concern. She really cares about her clients.
Steve Medica
09:33 10 Nov 21
I filed a proposal with another group, which came in as a referral from one of my brokers. My experience went from ok to bad to worse, due to lack of communication and education on the process I was to embark on. I worked with Cori Naron in the past, and I came to her now for help on literally doing the work that the other group should have done. Cori stepped in, educated me, advised on rights, responsibilities, how the process works and what potential outcomes may happen. I do not have enough words of recognition and gratitude for what she did - she alleviated stress, anxiety, dead-end thoughts and she made me live again. Congrats to DSklar for hiring her and retaining such talent.
Giani Kokolakis
18:45 25 Oct 21
Very professional service. Before contacting David Sklar & Associates i contacted bunch of other firms they seemed fishy. After I spoke with Jason Sklar at Hamilton Office I discovered professionalism with hope. I was explained every step of my situation with solution professionally. Thank you David Sklar & Associates.
Wajay Awan
07:29 12 Oct 21
I met David a few months ago and i am glad I did. He has helped me all the way through my bankruptcy with good advice and explained every step of the process. David is a very down to earth and very professional. Anytime I've had a question I was able to reach out to David by phone or email and he always got back to me. If your struggling with your bills and need a way to get help, I strongly recommend David Sklar &Associates to help you. My experience with them on 1-5scale would be a 5;; My life is so much better now, thanks to David Sklar.
Bruce Locke
16:13 08 Oct 21
I have had the privilege of being supported by Jackie S, at David Sklar n Associate.She was helpful, professional and friendly. I was able to get the help I needed at a difficult time in my life. I would recommend anyone who needs support with working out their debts to ask for Jackie, she will be waiting to assist however she can to help you through your debts. She works with a team who is always ready and responsive.Thank you Jackie and your team:)
Denise Simpson
15:17 09 Sep 21
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