If you’ve recently taken a look at your credit score and gotten that magic number that tells lenders how reliable you are, you may be looking for this credit score to be explained in a way that make sense. Here are some quick tips to help clear some of that up.

Anything above 700 is considered good by lenders. Your score can be anywhere in the range of between 550 and 900. 550 means that you are rated as the highest possible risk to the lenders and 900 is the best possible score, and means that you are rated the lowest possible risk.

Only 5% of Canadians have a score above 850, if your score is in this range then you should pat yourself on the back, and take comfort in knowing that lenders will bend over backwards to lend you money.

If you are like most of the rest of us then your score is somewhere between 700 and 850. This is still considered good in the lenders eyes and you shouldn’t have many problems getting a loan.

If your score is below 600 then you may have some trouble obtaining a loan or credit card, this means that you should start working towards rebuilding your credit.

Here is how your credit score is calculated:

35% payment history
This part of your score is decided on by your history of transactions with you lenders. Have you missed any payments? Have your loans ever gone into collections? How long has it been since you’ve made a late payment?

30% outstanding debt
15% credit length
10% number of inquiries
10% type of credit

If you’re interested in reading about the US FICO score take a look at “Your FICO credit score explained”. Thanks to John Hunter for submitting it.

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