Take the mystery out of FICO and how your credit score is calculated, then learn what you can do to improve it.


Do you know what a FICO score is? If not, you’re not alone.

First, what is FICO? FICO is simply the acronym of the name of the company that developed the credit score called Fair Isaac Company.

It is a type of credit score that makes up a substantial portion of the credit report that lenders use to assess an applicant’s credit risk and whether to give that person a loan. Put simply, it’s an indication of how likely you are to repay debts in a timely manner.

Did you know? 

  • 80% of Canadians don’t know what their credit score is?
  • 63% don’t know how their score is calculated?

FICO uses mathematical models, and takes into account numerous factors and variables from your credit bureau to determine credit risk. Some examples include:

  • Your payment history – do you make payments on time, have you missed any, do you pay part or all of what you owe each time?
  • Your current level of indebtedness – how much debt are you carrying such as a mortgage, unpaid credit card balances, car loans?
  • Types of credit used, length of credit history, and new credit – do you have a line of credit with a bank, how long have you had a credit card, have you recently been awarded a new line of credit?
  • How much credit you have – and how much of it you have already used?

A person’s FICO score will typically range between 300 and 850.

But, why does your score matter? Well, it depends on whether or not you want access to credit – and most people do – and need to – during their lifetime, whether it be for a mortgage, a credit card or a car loan.

Lenders use your FICO score to determine your level of credit risk – to them. The lower your score, the riskier you are to the lender. If you have a low score, you may be charged a higher interest rate for the loan, or you may not get approval at all for the money you need. Conversely, a good credit score can provide you with approval for the money you need and lower your interest rates, which means you spend less money over the life of the loan.

And, while many Canadians do not know what their score is, many are likely just as unaware that they will be turned away from the banks with a credit score of 680 and lower. And this is in fact, 25 to 30 per cent of Canadians. At Affirm Financial, we refer to this group as the “mid-market” – nearly one-third of the population that has great difficulty accessing credit from major financial institutions or are completely frozen out.

Those who can’t get credit from the major financial institutions are turning to very high interest sources – like the payday loan sector. And at their 600 per cent interest rates, this type of lending service will not assist borrowers to rebuild their credit scores in the long run.

If you don’t know your FICO score, it’s time you did – and not before you are applying for an important loan. For a small fee you can obtain it from Canada’s two credit bureaus: TransUnion and Equifax.

It can be challenging to establish a strong credit history, especially if you are currently experiencing or recovering from some form of financial hardship. Stay tuned to the Affirm blog. We’ll provide useful posts to show you how to save money, work towards reasonable goals and how to establish a solid credit history.