Your income (capacity to repay) usually indicates how much money you can borrow, but your credit report (repayment history) will usually determine whether you can borrow additional money. Past credit behaviours are categorized into five predictive characteristics used by the credit bureau to determine your credit score.

Past Payment Performance (35%): Fewer late payments, judgments, liens or collections, are better. Recent late payments weigh more than those two years past.

Credit Utilization (30%): Low balances (at or below 30% of available credit limit) on a few cards are better than high balances on one or two cards. Several cards can be a detriment.

Credit History (15%): The longer accounts have been open and in good standing, the better. Avoid “credit surfing” – opening new accounts and closing established ones will negatively impact on a credit score.

Types of Credit in Use (10%): Traditional banking or retail accounts score higher than finance company accounts especially those that offer deferred payment options.

Previous Inquiries (10%): Seeking new credit over a short period of time can be associated with higher risk. Administrative inquiries by credit grantors do not affect the credit score.

How do you fare? Individuals may obtain a copy of their personal credit report from Equifax Canada Inc. or TransUnion Canada directly. Call me at 416-674-2318 to find out how to obtain a copy of your record.