We’ve all been there. You’re at a financial institution or a car dealership inquiring about a loan and they announce they need to pull your credit score. Suddenly, you feel as though you’re standing there in your birthday suit, utterly exposed. You don’t know what they’re seeing on that computer screen, but you’re thinking it’s probably the darkest depths of your soul.

Relax. Your credit score is not a measure of your humanity, but it is an important aspect of your financial profile. It may be used to determine some pretty weighty financial factors in your life, such as whether or not you’ll be able to lease a vehicle, qualify for a mortgage or get a student loan.

In Canada, credit scores are calculated by Equifax and TransUnion. They collect information about you from your credit file to determine your credit score. Credit scores generally range from 300 to 900, with scores 660 and up generally considered good, very good, or excellent.

This score can have a pretty big impact on your life, so if you haven’t given it much thought, it might be time to do so. Here are some of the key issues that can affect your credit score:

1. Payment history
Both Equifax and TransUnion say that payment history is weighted the most heavily in your credit score. Late payments or having your account sent to a collection agency has a very negative impact on your credit score.

2. Balance-to-limit ratio
Your Balance-to-limit ratio is the amount of debt you have relative to your credit limit. Equifax and TransUnion suggest aiming for account balances below 25 or 30 percent of your credit limit.

3. Multiple credit inquiries 

Both credit agencies recommend applying for credit in moderation. Too many inquiries in a short period of time can sometimes be interpreted as a sign that you are experiencing financial difficulties or overextending yourself by taking on more debt than you can afford. 

4. History of accounts
TransUnion recommends people think twice before closing old accounts, because they show a pattern of consistency in your credit history. Having a longer history on your credit accounts earns you more points, so avoid closing your accounts if you may need them in the future. 

5. Too few credit sources

Showing a mix of credit products (mortgage, credit card, retail store card, line of credit, car loan, etc.) will procure more points on your file than having only one type of credit, such as only credit cards.

6. Too many credit sources
Having a lot credit accounts, particularly ones that carry balances, is another red flag for Credit Bureaus. If Equifax and TransUnion think you have too much credit, they will deduct points.

What? Too much credit is bad and too little credit is bad? It can be tough to know if you’re striking the right balance with your credit rating. One sure fire way to know where you stand is to pull your own credit report. Trans Union and Equifax both charge to provide credit reports, but online companies like Borrowell, Credit Karma and Mogo will provide your credit report for free, and your social insurance number is not required.