What is a FICO socre?

FICO Score

Your FICO score is a numerical representation of your creditworthiness as determined by Fair, Isaac and Company. This credit score is determined by credit report information obtained from the credit bureaus, and is used by lenders to assess your ability to repay loans. Your FICO score will determine credit limits set by lenders, and also the interest rate that you will be charged for money you borrow. Individuals with lower scores will be less likely to obtain loans and charged higher interest than those with a better credit score.

Although credit scores are primarily used by banks; other organizations such as cell phone companies, insurance companies, government, employers and also landlords may use your FICO score to determine your credibility in financial affairs, your likelihood of default and level of personal trustworthiness.

How is My Fico Score Determined?

Each of the following factors are assessed to calculate your FICO score:

Payment History (35% of FICO score.)

Have you paid your debts on time? Late payments of 30, 60, or 90 days or more will be recorded on your credit file and will negatively affect your FICO score. Payments paid as agreed will reflect positively on your score, and will increase your score over time as payments are received in a timely manner. Do you carry a balance on your credit card each month, or do you pay off your balance in full on a regular basis? Have any of your credit accounts gone to collections or have you filed for bankruptcy in the last seven years? If a collection agency has had to collect payment from you or if you have declared bankruptcy, this will negatively affect your credit rating and be factored in on your FICO score.

Outstanding Debts (30% of FICO score.)

Your credit limits and whether or not you are using all of your available credit will be assessed to determine how much debt you have. If you use your credit responsibly by maintaining a low “use to availability” ratio, this will reflect positively on your credit score. If however, you use all of your available credit limit and carry the maximum balance forward each month, this will lower your score.

Account History (15% of FICO score.)

Account history factors in how long you have had each credit account. If your accounts are relatively new, or you are in the early stages of rebuilding your credit, this will calculated as a lower value in your credit score. Accounts that have been held for several years or more and have been repaid in a timely manner will score higher.

New Credit and Recent Inquiries Made Against Your Credit Report (10% of FICO score.)

Inquiries made recently about your credit report indicate that you have been seeking credit. While this is perfectly normal for the typical consumer, if the number of inquiries from different organizations are seen as excessive, this will reflect badly on your credit score. This may mean that you have been turned down by credit companies (and are thus seeking credit elsewhere), or that you are possibly attempting to live beyond your means by trying to access more credit than you have the ability to repay. It is important to note that there are two types of inquires against your credit report: soft inquiries, which are those made by you to ascertain your credit score; and also hard inquires made by credit agencies to determine your creditworthiness. Your FICO score is only affected by hard inquiries. It is important to note that one or two hard inquiries each year are considered normal, and will not overly affect your score in a negative way. Several hard inquiries over a period of months, however, may be factored against you.

Types of Credit Used (15% of FICO score.)

What types of credit do you use? Do you only have credit cards, or do you have an auto loan, a mortgage, a business loan or other type of credit? A mix of credit of various types will favour positively in determining your FICO score.

What is the Average FICO Score in Canada?

The average Canadian has a FICO score of 720. The following table shows the range of Canadian consumer credit scores:

Percent of Population: Fico Credit Score
2% 300 – 499
5% 500 – 549
8% 550 – 599
12% 600 – 649
15% 650 – 699
18% 700 – 749
27% 750 – 799
13% 800 – 850