A credit score is a three-digit number evaluation that represents the creditworthiness of an individual. This score is typically calculated by the credit reporting agencies, such as Equifax or TransUnion in Canada, which tracks how the common population pays back debt, such as credit cards bills, bank loans, car loans and so on.
One could have different scores depending on the lending situation. For example, an auto lender might use one scoring model, while a mortgage lender might use another. Scores may vary with different ways available to calculate credit scores. However, they all are based on the information in one’s credit reports.Explore Definition
Generally, following factors are considered to calculate credit scores:
- One’s payment history
- How long one had credit
- The types of credit one has (credit cards, auto loans, student loans, mortgages, etc.)
- One’s credit limits and how much of those limits one is using
- How much debt one has
- Hard inquiries on one’s credit report.
In Canada, credit scores generally range from 300 to 900; the higher the score, the more financially trustworthy a person is considered to be.