What makes up your credit score?

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If you read ‘What credit score is regarded as ‘good’ for a car loan?’ last week, you may remember that I said I would go into what makes up a credit score. If you’re planning to buy a car on finance anytime soon and will be shopping for an auto loan, it is good information to have to hand.

Knowing what makes up a credit score can help you rebuild or improve your score if you need to. You don’t always need to though as Car Nation Canada works with all kinds of people in all kinds of situations to access credit.

So what makes up a credit score? Typically it will be the following factors:
  • Payment history
  • Credit use
  • Credit history
  • Public records
  • Credit inquiries
Let’s take a quick look at each.

Payment history
Payment history looks at how many of your monthly payments you pay on time and how many times you were late or missed a payment. Depending on who is providing the score, this can influence up to 35% of your credit score. This figure is from Equifax who tells us exactly how a score is made up.

Credit use
Credit use is about how much credit you currently have. That will include credit cards, loans, mortgage and any other financial instrument you might use. The more credit you have, the closer you will be assessed for affordability. If you have too much credit already, you may not be able to borrow the amount you want. Too little and there may not be enough of a record for accurate assessment of risk. Equifax says this makes up 30% of your score.

Credit history
Credit history is exactly what it says. It looks at your previous loans and credit, whether you have paid them, made all your payments on time and how well you serviced that debt. This gives lenders an idea of what level of risk you are. If you always pay on time, your score is higher. This makes up 15% of your credit score.

Public records
Public records checks you for presence on voter’s register, previous addresses and all those added things that prove you are who you say you are. This can all link to financial behaviour and reliability. For example, if you move every year, the lender will likely want to know why. This makes up 10% of your credit score.

Credit inquiries
Credit inquiries concern themselves with ‘hard inquiries’. These are when a lender or creditor checks your credit record. The more hard inquiries within a short span of time, the more suspicious a lender might be. If you were just shopping around for a good deal, that does not count against you but you may have to explain it. This makes up 10% of your score.

That’s pretty much how your credit score is calculated. It’s a huge algorithm that assesses many elements within each of these to come up with the score.

Just remember, your score is only an indicator of financial risk, it does not necessarily prevent you accessing credit. Car Nation Canada works with all kinds of people in all kinds of situations to access car loans. Ask us about your options if you’re in the market for a new car.
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