Different Kinds of Credit Score

It is considered very important that you should have an idea of where your credit is at on the credit score range. Your score and ranking is an important factor in receiving lower interests and loan approvals for credit cards.

In Canada, Equifax and TransUnion are most popular types of credit reporting agencies. Their reports are similar to each other but each has their own way of determining scores. It is common to find that determining the worth of your credit, a credit company or lender will check out your credit score and credit report.


What is a credit rating?

It is a chart that lenders usually use to resolve the conditions of your credit score and to determine rates you are likely to receive. It can also be defined as an estimate of the ability of a person or organization to fulfill their financial commitments based on previous dealings.

It determines the creditworthiness of an individual, corporation, state, provincial authority, or a sovereign government.

Credit Ratings apply to businesses and government while credit scores apply only to individuals or persons. Credit scores are derived from the credit history maintained by credit reporting agencies such as Equifax, Experion, and TransUnion.

An individual’s credit score is presented as a number generally ranging from 300 to 850. Likewise, sovereign credit ratings apply to national government while corporate credit ratings solely to corporations. Some credit rating agencies typically assign letter grades to indicate ratings while some make use of numbers   

Brilliant (Scores 780+) – a rate of about 780 and above qualifies you for the very best interest rates offered in the market and you would be easily considered for a loan.
Very Good (Scores 779-720) – this can also be considered ideal and persons with this ratings are still qualified for some of the best rates offered in the market
Good (Scores 719-680) – persons within this credit range have no trouble at all getting approval for a new credit.
Average (Scores 679-620) – this is still accepted as a good range but the individuals here are liable to higher interest rates. Equifax has shown that at the end of the year 2012, the average national credit score was 696.
Poor (Scores 619-580) – persons in this range are at high risks of being disapproved for loans and if approved it will be at relatively high-interest rates. However, they can still qualify for bad credit loans.
Very Poor (Scores 579-500) – people in this range find it difficult to get approval for anything but they can still have a shot at fixing their credit
Awful (less than 500) – Persons with scores below 500 are more likely to be rejected by banks, but still have a small chance of getting a loan from a private lender.

Factors That Influence Credit Score

The factors that affect the estimation of your credit score can be mirrored down to these five:

History of Payments (35%) – This shows the list of payments made to lenders or creditors and how frequently you paid back. To improve your credit score it is important to pay your loans or bills on time. 

Debt/ Utilization (30%) – This compares the amount of debt a client has to his available credit. For instance, a total credit limit of $5000 will always carry a higher balance and will reflect badly on your credit score. Pay up your debts and reduce your balance to 35% of your present credit to increase your credit score. 

Credit Length (15%) – Facts have shown that an older credit account reflects well on your credit score. It is better to always keep your old accounts open and cancel newer ones.

New Inquiries (10%) – your credit score is affected each time a potential creditor refuses your credit. Applying for many new credits within a short duration can reduce your credit score and it could be viewed as a red flag for other creditors.

Diversity (10%) – it is important to present diversity in your credit accounts because it allows potential creditors to consider you as a dependable client.