Original Internet Page at http://www.lendingmax.ca/artman/publish/Credit_scores.php

Understanding your credit score (FICO)
Bruce Schoenne, AACI, P.App
Apr 9, 2005, 18:52


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)

Amounts owed ( 30% of the overall score)

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

New credit ( 10% of the overall score)

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

Add it up and you get…?


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 LendingMax Canada mortgage specialists today.

Suggested resources:

Financial Consumer Agency of Canada - Retrieving and understanding your credit report and credit score from credit reporting agencies.

LendingMax 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.