What is a credit score and how is it calculated?

A credit score is a numerical representation of an individual's creditworthiness, which signifies their ability and reliability in repaying borrowed funds. It plays a crucial role in determining a person's access to credit cards, loans, mortgages, and other financial services. Generally, credit scores in Canada range from 300 to 900, with higher scores indicating better credit reliability. The calculation of a credit score is based on several factors derived from a person's credit report. Primarily, these factors include payment history, which accounts for approximately 35 percent of the score, reflecting whether payments are made on time. The amount owed constitutes around 30 percent, focusing on the total debt as compared to available credit. Length of credit history, which comprises 15 percent, considers how long credit accounts have been active. New credit, representing about 10 percent, looks at how many recently opened accounts there are, while types of credit used, which is 10 percent, evaluates the variety of credit accounts, such as revolving credit and installment loans. It is essential for individuals to regularly monitor their credit reports to ensure accuracy and address any discrepancies, as these can impact their credit scores significantly. For more extensive details, including potential services, individuals may visit the relevant Equifax web page.