Credit
scoring
is a
statistical
method
that
lenders
use to
quickly
and
objectively
assess
the
credit
risk of
a loan
applicant.
The
beacon
score is
a number
that
rates
the
likelihood
you will
pay back
a loan.
This
comes
from one
of the 2
reporting
Credit
Bureaus,
Equifax
and
Trans
Canada.
Scores
range
from 350
(high
risk) to
950 (low
risk).
Credit
scores
only
consider
the
information
contained
in your
credit
profile.
They do
not
consider
your
income,
savings,
down
payment
amount,
or
demographic
factors
like
gender,
race,
nationality
or
marital
status.
Past
delinquencies,
derogatory
payment
behavior,
current
debt
level,
length
of
credit
history,
types of
credit
and
number
of
inquiries
are all
considered
in
credit
scores.
Your
score
considers
both
positive
and
negative
information
in your
credit
report.
Late
payments
will
lower
your
score,
but
establishing
or
reestablishing
a good
track
record
of
making
payments
on time
will
raise
your
score.
Different
portions
of
your
credit
file
are
given
different
weights.
They
are:
- 35%
-
Previous
credit
performance
(specific
to
your
payment
history)
- 30%
-
Current
level
of
indebtedness
(current
balance
compared
to
high
credit)
- 15%
-
Time
credit
has
been
in
use
(opening
date)
- 15%
-
Types
of
credit
available
(installment
loans,
revolving
and
debit
accounts)
- 5%
-
Pursuit
of
new
credit
(number
of
inquiries)
The
most
important
factor
for a
good
credit
score is
paying
your
bills on
time.
Even if
the debt
you owe
is a
small
amount,
it is
crucial
that you
make
payments
on time.
In
addition,
you may
want to:
keep
balances
low on
credit
cards
and
other
"revolving
credit;"
apply
for and
open new
credit
accounts
only as
needed;
and pay
off debt
rather
than
moving
it
around.
Also
don't
close
unused
cards as
a short
term
strategy
to raise
your
score.
Owing
the same
amount
but
having
fewer
open
accounts
may
lower
your
score.
Recent
changes
minimize
the
negative
effects
that
rate
shopping
can have
on a
mortgage
applicant.
If there
is a
consumer
originated
inquiry
within
the past
365 days
from
mortgage
or auto
related
industries,
these
inquiries
are
ignored
for
scoring
purposes
for the
first 30
calendar
days;
then,
multiple
inquiries
within
the next
14 days
are
counted
as one.
Each
inquiry
will
still
appear
on the
credit
report.
Every
score is
accompanied
by a
maximum
of four
reason
codes.
Reason
codes
identify
the most
significant
reason
that you
did not
score
higher.
The
reason
codes
can help
a lender
describe
the
reasons
for
higher
than
expected
rates or
loan
denial.
Your
credit
report
must
contain
at least
one
account
which
has been
open for
six
months
or
greater,
and at
least
one
account
that has
been
updated
in the
past six
months
for you
to get a
credit
score.
This
ensures
that
there is
enough
information
in your
report
to
generate
an
accurate
score.
If you
do not
meet the
minimum
criteria
for
getting
a score,
you may
need to
establish
a credit
history
prior to
applying
for a
mortgage.
