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1 Mar

Understanding your Credit Score

General

Posted by: Michael Atkinson

How does the Credit/Beacon Score number work?

·         This three digit number is a statistical formula that takes your personal credit information from your credit report
·         Scores range from 300 – 900
·         The ‘Beacon Score’ is branded by Equifax
·         Everything counts: age, address, phone number, dependents, length of employment with same employer
·         Inquiries = 10% (kept on record for 3 years)
·         Length of credit history = 15%
·         Might want to keep trades that have a long and positive history
·         Employer on credit bureau
·         Equifax charges customer for electronic delivery but not via mail
·         Bad debt stays on for 7 years

How is your score determined?

Payment history: Roughly 35% of the total score

·         Account payment information on specific types of accounts including: credit cards, retail accounts, loans, finance company accounts, mortgage, etc.
·         Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and delinquency.
·         Severity of delinquency and amount past due on delinquent accounts or collection items
·         Time since past due items, adverse public records (if any), or collection items (if any)
·         Number of past due items on file
·         Number of accounts paid as agreed

Amounts owed: Roughly 30% of the total score

·         Amount owing on accounts
·         Amount owing on specific types of accounts
·         Lack of a specific type of balance, in some cases
·         Number of accounts with balances
·         Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
·         Proportion of installment loan amounts still owing

Length of credit history: Roughly 15% of the total score

·         Time since accounts opened
·         Time since account activity

New credit: Roughly 10% of the total score

·         Number and proportion of accounts that are recently opened, by type of account
·         Number of recent credit inquiries
·         Time since recent account opening(s), by type of account
·         Time since credit inquiry(s)
·         Re-establishment of positive credit history following past payment problems

Types of credit used: Roughly 10% of the total score

·         Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

How to read the Nine Point Credit Rating Scale?

·         R0 Too new to rate, approved but not used.
·         R1 Pays (or paid) within 30 days of billing; pays account as agreed.
·         R2 Pays (or paid) in more than 30 days, but not more than 60 days, or one payment past due.
·         R3 Pays (or paid) in more than 60 days, but not more than 90 days, or two payments past due.
·         R4 Pays (or paid) in more than 90 days, but not more than 120 days, or three or more payments past due.
·         R5 Account is at least 120 days overdue, but is not yet rated 9.
·         R7 Making regular payments under a consolidation order or similar arrangement.
·         R8 Repossession (indicate if it is a voluntary return of merchandise by the consumer).
·         R9 Bad debt, placed for collection

How to Improve your Credit Score?

The best way to improve your credit score is to make consistent minimum (or more) monthly payments for your credit cards, loans, mortgages etc.

If you have unused credit cards, I would suggest closing them, but make sure that you have at least 2 active tradelines (credit cards, lines of credit, etc.) and that they have been open for a minimum of 2 years. When qualifying for a mortgage, lenders look at your 2 year payment history as this gives an accurate description of your payment habits.

How to correct inaccurate information on credit bureau Equifax Canada?
CALL: 1-800-465-7166 between 8:00am and 5:00pm ET

Did you know?

·         I can help finance clients with bad or no credit if they have enough down-payment
·         I can help homeowners pay off high interest credit cards with equity loans
·         I will obtain exceptions from the banks for a client with imperfect credit history as long as their score is within the guidelines
·         I advise clients with bruised credit history to improve their score and qualify for a mortgage to get best rates and products

Need more information or have any questions? Call me directly on my cell at 778-554-4556, or send me a direct email at matkinson@dominionlending.ca