What is a credit score?
A credit score is a statistical formula that translates personal information from your credit report and other sources into a three-digit score. For example, when you fill out a loan application, pieces of information from the application along with information from your credit report will be used to compute a score that indicates to the lender the statistical probability that you will become delinquent on the loan.
Some scores that lenders use are based strictly on the data in your credit report; these are known as "bureau scores". The most widely-used bureau scores in Canada were developed by Fair, Isaac and Co., headquartered in San Rafael, California.
It is important to understand that a credit score is only one criterion that a lender will use in making decisions. For example, in mortgage lending, the lender will take into account the property being purchased and the homeowner's equity. Many lenders look at their relationship with the customer, which may include other financial services. Each lender will have its own policies and you should feel comfortable asking a credit institution about these. Our work with credit grantors has shown us that most lenders want their customers to have a better understanding of their lending processes.
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