What's affecting your credit score?

I still have an Eaton’s department store credit card even though there is no where to shop with it.

That hasn’t stopped the long-forgotten card from making its way on to my credit report and ultimately affecting my credit score.

When contacted by a representative of TransUnion LLC — one of two companies providing credit ratings in Canada, the other being Equifax Inc. — for a story about how to improve credit ratings I decided it would be a good time to check my own score.

TransUnion gave me a code to download my score, something that normally costs $14.95 for a one-time credit profile and another $7.95 to get your credit score. The company also offers a program that allows you to monitor both whenever you want for $14.95 a month.

“One of the benefits of checking your credit report is to make sure information is accurate and up to date,” says Tom Reid, director of consumer solutions for TransUnion.ca, referring to opened accounts you may have forgotten about.

So how did I do? I scored 786 out of 900, considered “good” and better than 66.02% of the population. But I somehow feel like the kid who got a B on an assignment. I want that A.

According to my report, I have too many bank or national revolving accounts on my credit report. I have three major credit cards, American Express, Visa and MasterCard. I have a car loan and an unused line of credit with my bank.

That Eaton’s card probably didn’t help my score and then there’s the Hudson’s Bay card account that was still open that I haven’t used in a decade. Show me a Canadian who hasn’t opened up one of those to get the 10% discount. I just never closed mine.

There are five different categories that go into a credit score. The first is on-time record of payment — got that covered. Next up is the number of inquiries or applications for credit.

You remember getting that credit card for a free tee-shirt at a hockey game or signing up for the department store card to get the discount and then destroying it. You think that doesn’t matter? Think again.

“It could potentially have a negative impact on your score,” says Mr. Reid, about applications I’ve made to various department stores over the years. Fortunately, I haven’t made any in the last two years.

Your utilization of credit is also a major factor — that’s your balance divided by available credit. It’s not based on whether you have a balance at the end of the month but it’s the balance outstanding at a given moment divided by your available credit.

“If that number exceeds 40%, that is typically a warning sign,” says Mr. Reid, noting a higher credit limit will keep that percentage down.

The last factors are longer term credit history and the breadth of your credit, somebody who has just one credit card doesn’t look as strong as someone who also has a line of credit and say a mortgage.

“It’s a fantastic credit score,” says Mr. Reid, about my result, adding I shouldn’t have a problem getting credit. Yeah but my editor who took the same test scored 831.

All of this may just seem like a vanity project but there are real problems you can encounter with bad credit and a poor rating, says Vince Gaetano, a principal broker with Monster Mortgage.

“A number of things can happen if you don’t have a good score. Right now 680 seems to be the cut off for buying a home with mortgage [default] insurance,” says Mr. Gaetano. “If you are below 600, you are in real trouble, you are going to a B leader.”

Those lenders will just kill you on interest rates — 5% to 6% compared to 2.25% —not to mention the fact you’ll need to have at least a 20% deposit on your home.

Then there’s the fees for bad credit. Lenders charge 1% of the value of the mortgage for people with bad credit. Who wants to pay $3,000 extra on a $300,000 mortgage. The broker will also demand 1% because your bad credit means the bank is not compensating the broker for you, the questionable customer.

What’s the worst score Mr. Gaetano has seen. “Somebody had like 430-something. I mailed them a bullet. I wouldn’t lend a guy like that $5 for lunch. That’s happens when you stop paying everybody,” he says.

I’m starting to feel better about my score. But I still cancelled my open HBC card and started to investigate how one goes about cancelling a credit card for a store that no longer exists.