![]() Real estate prices in Canada are at epic highs, and most Canadians do not have the 20% down payment needed for a mortgage. This can be problematic when a consumer has a borderline credit score and is applying for mortgages. This lack of standardization leads to scoring inconsistencies.įor example, a person could have a credit score of 680 when signing into their Equifax account, but the credit-granting establishment may only see a credit score of 650! What gives? What can you do about it? Since there are no standardized credit scoring models that are universally accepted, it truly is consumer beware. To make things even more complex, each lender will specify what type of credit profile they are looking for in prospective customers. How credit scores are calculatedĮach credit reporting agency has its unique scoring card. ![]() Industry experts recommend keeping your credit utilization ratio between 30% and 40%. For example, if the total amount of credit available was $10,000 and the total balance outstanding was $5,000, the credit utilization ratio would be 50% which is relatively high. The amount of debt that a consumer is carrying will impact their credit score. The borrower makes regular payments at predetermined intervals, and with each payment, the balance outstanding is reduced.Ĭonsumers who do not have both of these types of accounts will not have a high credit score. Installment payments or installment accounts are car loans, furniture purchases, etc.This “revolving” is what gives the account this classification. When the balance has been repaid, the consumer can use the funds again. A consumer would use these facilities then pay the balance when due. Credit cards and lines of credit are commonly referred to as revolving accounts or revolving lines of credit.It is an assumption that lenders will make.Īnother variable that impacts a credit score is the type of credit. Therefore a person who has always paid their debts on time will most likely continue to do so in the future. The rationale is that past behaviour is an excellent indicator of future behaviour. However, the average Canadian has a score in the 660s, so you should keep tabs on your credit score. Arguably, the most influential variable that impacts credit scores is the repayment history. Credit scores are signals to lenders and others that you are responsible with money.Įquifax has a scoring range of 300-850, where 300 is terrible, and 850 would be someone with perfect credit. If you pay cash for everything, you would not have a credit score. Variables that influence credit scoresĬredit scores are three digits that indicate how responsible a person is with their financial obligations. We will focus on Equifax for this conversation, but each agency has its unique approach to credit scoring. The top agencies in Canada are TransUnion and Equifax. There are two major credit reporting agencies in Canada, and the USA has three. The top credit reporting agencies in Canada Are you curious about credit scores and how they are calculated? We will take a look behind the curtain and show you how to make the most of your credit score. Without credit, our economy would come to a screeching halt.
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