All about credit scores

Credit score – we hear this term thrown around a lot, but do you know all the ins and outs that go into what makes up a credit score? If not, you’ve come to the right place!

What's a credit score?

A credit score is a number between 300 and 850 that explains your ability to repay loans. Financial institutions and lenders use it to determine if they will lend you money and if so, how much. Credit scores also influence decisions surrounding credit increases, insurance, line of credit and credit limits.

What does my credit score mean?

  • 300 to 579 = poor
  • 580 to 669 = fair
  • 670 to 739 = good
  • 740 to 799 = very good
  • 800 to 850 = excellent

How's my credit score calculated?

Credit scores are calculated based on a variety of areas – not just your credit card! Some contributing factors to your credit score include:

  • Length – How long have you had a credit score?
  • Consistency – Do you miss payments? Do you regularly carry a balance on your credit card? If so, for how long?
  • Utilization rate – What is the total amount of your debt?
  • Type – Do you have credit cards, loans, etc.?
  • History – Do you have a record of bankruptcy?

Why's it important to build a good credit score?

  • Better rates and approvals: A good credit score makes your financial institution more likely to approve your applications for credit cards, mortgages and loans. Also, the higher your credit score, the lower your interest rates will be.
  • More cash in your pocket: Paying less in interest, on top of your credit card debt, will save you money that can be put towards other debts or purchases.
  • Additional perks: A higher credit score may lead to better loan terms, such as a higher credit limit or a lower fixed rate mortgage. Additionally, you may qualify for credit cards that come with rewards or cash back!
  • Advanced opportunities: Lastly, some career positions that require high security may perform a credit check. A good credit score will help you qualify!

How do I see what my credit score is?

You can access your credit report online with Equifax and TransUnion. These are the main credit bureaus in Canada, and they update credit reports monthly.

They have their own equations to determine your score, so keep in mind that your score with each may be different. Regardless, this breakdown gives an idea of what they consider:

  • 35% is based on your payment history.
  • 30% is based on your capacity. This is the amount of unused credit you have available.
  • 15% is based on the length of your credit history.
  • 10% is based on new credit. Opening new credit cards has a negative short-term effect on your credit score, so don’t open a bunch of them all at once.
  • 10% is based on your mix of credit. A variety of types of credit boosts this part of your score. You want to have revolving credit, but you also want instalment loans like a mortgage or car loan.

The credit scoring system was developed in the 1980s and, at first, it was mostly used in loaning money. Today, credit scores are used for all kinds of things, like when you rent an apartment or even when you’re being considered for employment.

Credit scores introduced a standardized way to measure creditworthiness. Before that, loan approval was based on an individual lender’s judgement, and it could be a time-consuming, inconsistent and biased process.

Credit scores can say a lot about a borrower, but they don’t tell the whole story. At Affinity, we take the relationships we have with our members seriously, so that’s also part of the picture when we consider a loan application.

Life happens, and a bad credit score can be the result. So, it’s important to take your payments seriously and understand what can happen if you don’t. For example, if you’re moving out of a rental property and skip out on your last bill, it’s likely that it will get sent to collection. That’s going to have a negative impact on your credit score which will affect your ability to borrow.

If you’re working to get your financial life back on track and you have a good history with us, we’ll balance that against a negative credit score.

Credit Builder Loans

Establish or re-establish a good credit rating with an Affinity Credit Builder Loan. The money you borrow gets invested, so your savings grow too. It’s a win‑win!

Learn more about Credit Builder Loans

Restart Loans

Stuck in a borrowing cycle or facing an unexpected expense? Our Restart Loan is a fast and affordable alternative to a payday loans that can get you out of a bind, build your credit and put you on the path to financial success.
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