Credit Scores & Credit Reports

Credit doesn’t have to be a mystery. This page will help you understand what credit is, why it matters, and how you can use it to your advantage.

What is a credit score?

A credit score is a 3-digit number, ranging from 300-900, that gives a lender a snapshot of your financial health at a given time. Lenders use information from your credit report to compute a score that will indicate the probability of you becoming delinquent on your loan – the higher your score, the more likely you are to make payments on time. Your credit score helps the lender determine how much you can borrow and what the terms will be.

What makes up your credit score?

  • 35% is based on payment history
  • 30% is based on capacity
  • 15% is based on length of credit
  • 10% is based on accumulation of debt in the last 12-18 months (inquiries, opening dates, etc)
  • 10% is based on a mix of credit (installment loans help to raise your score but revolving credit and finance companies will cause it to decrease)

What will hurt your score?

  • Missing payments
  • Maxing out your credit cards
  • Closing your credit cards (it lowers your available capacity)
  • Shopping for credit excessively
  • Opening up numerous accounts in a short time period
  • Having more revolving loans than installment loans (ex. more credit cards or line of credits than car loans or mortgages)
  • Borrowing from finance companies

What doesn’t affect your credit score?

  • Debt ratio
  • Income
  • Length and type of residence
  • Length and type of employment

How to improve your score:

  • Pay down your credit cards and try to keep the balance below 75% of your available credit
  • Continue to make payments on time
  • Slow down on opening new accounts – too many inquiries may indicate financial difficulties
  • Ensure information on your report is correct
  • If you’re shopping around for a car or mortgage try to do so within two weeks as the inquiries are normally treated as one

What is a credit report?

Your credit report is created when you first borrow money or apply for credit. Companies you’ve borrowed from, including banks, finance companies, credit unions, and retailers, send specific information related to your financial transactions to credit-reporting agencies.

What types of accounts will show up?

  • Credit accounts and transactions
  • Telecommunications accounts, including your cell phone and internet
  • Public records including bankruptcy, legal judgments and any registered items (ie – liens)
  • Debts sent to collection agencies
  • Inquiries from lenders and others who request your credit report
  • Remarks, including consumer statements, fraud alerts and identity verification alerts

What information is on a credit report?

  • When you opened an account
  • Whether you make your payments on time
  • Whether you go over your credit limit
  • What your limit or starting balance is
  • If and when you have missed payments
  • Any collections, bankruptcy, consumer proposal, garnishments, liens or judgements

Items are weighted based on time through your credit report:

  • 40% of your score is dependent on activity within the past 0-12 months
  • 30% depends on the last 13-24 months
  • 20% depends on the last 25-36 months
  • 10% depends on anything older than 37 months

Understanding your credit report:

Lenders use codes when sending your information to the credit reporting agency to demonstrate how and when you make payments. Codes are made up of a letter and a number.


Letters will represent the type of credit:

  • R – Revolving Credit
  • O – Open credit
  • I – Installment-based credit
  • J – Joint credit
  • I – Individual credit


The number attached to the code represents whether you are on time with your payments:

  • 0 – too new to rate or you’ve been approved but haven’t used the account
  • 1 – you pay within 30 days of billing or pay as agreed
  • 2 – 31-59 days late
  • 3 – 60-89 days latw
  • 4 – 90-119 days late
  • 5 – more than 120 days late but not yet rated a 9
  • 7 – you’re making regular payments under consumer proposal or credit counseling agency
  • 8 – repossession
  • 9 – debt was written off as bad, sent to a collection agency or you’ve declared bankruptcy

Items stay on your credit report for varying amounts of time depending on the reporting agency.

Manage your money with Libro

Libro Coaches are here to support you in making informed financial decisions for your unique situation.

  • Personal loans
  • Lines of credits
  • Mortgages
  • Investing

Get in touch with a Libro Coach today