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Understanding your credit score (FICO)

Bruce Schoenne, AACI, P.App
Jun 6, 2008 - 6:52:00 PM

FICO Score, BEACON Score, Equifax

Driven by the financial industries desire for an equitable method of comparing the credit worthiness of borrowers, Fair Isaac & Co developed a credit measurement tool in the 1950's called the FICO score.

Now considered to be the industry standard, the FICO® score is used by most lenders from across Canada and the United States to assess lending risk.

FICO® score, BEACON® score, EMPIRICA® score

The three most recognized credit reporting agencies include Equifax, Experian and TransUnion, with Equifax being the most recognized agency in Canada. Known as a BEACON® score at Equifax, EMPIRICA® score at TransUnion and the Experian/Fair Isaac Risk Score at Experian, all use formulas developed by Fair Isaac & Co.

How is a FICO® score determined?

*In general terms, the FICO® score evaluates five main categories of information:

Payment history ( 35% of the overall score)

  • Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.).
  • Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items).
  • Severity of delinquency (how long past due).
  • Amount past due on delinquent accounts or collection items.
  • Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any).
  • Number of past due items on file.
  • Number of accounts paid as agreed.

Amounts owed ( 30% of the overall score)

  • Amount owing on accounts.
  • Amount owing on specific types of accounts.
  • Lack of a specific type of balance, in some cases.
  • Number of accounts with balances.
  • Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts).
  • Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans).

Length of credit history ( 15% of the overall score)

  • Time since accounts opened.
  • Time since accounts opened, by specific type of account.
  • Time since account activity.

New credit ( 10% of the overall score)

  • Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account.
  • Number of recent credit inquiries.
  • Time since recent account opening(s), by type of account.
  • Time since credit inquiry(s).
  • Re-establishment of positive credit history following past payment problems.

Type of credit used ( 10% of the overall score)

  • Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.).

Add it up and you get…?

  • Each of the above noted factors, along with others, are assigned a value and a weight. The results of these factors are then added up and combined into a single number. FICO® scores can range from 300 to 800. The higher the number the better.
  • In general terms, borrowers with reasonable credit typical have FICO® scores, which range between 600 and 800.


A score takes into consideration all these categories of information, not just one or two.

No one piece of information or factor alone will determine your score.

The importance of any factor depends on the overall information in your credit report.

For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. Thus, it's impossible to say exactly how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different credit profiles. What's important is the mix of information, which varies from person to person, and for any one person over time.

Your FICO score only looks at information in your credit report.

However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.

Your score considers both positive and negative information in your credit report.

Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.

Questions? Talk to one of our Mortgage specialists today. 

Suggested resources:

Mortgage Glossary – Don’t understand some of the terms used in these articles? Our mortgage glossary provides simple definitions.

Canadian Mortgage Calculator - Calculate mortgage payments, amortization schedules, interest costs and more. The more you play with it, the more you’ll see what it can do.

GDS and TDS – Understanding your GDS and TDS is an important part of your borrowing ability.

Credit repair 101 - Tips on how to repair not so good credit.

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