Oriana Financial Group of Canada Ltd.

Credit Score / Beacon Score – Understanding It!!

Your credit score is a three-digit number that can determine whether you get a loan and at what rate. So, what does your credit score say about you? How can you get it? And how can you improve it?
 
Credit scoring was developed by Fair Isaac & Co. in the United States to help credit bureaus assess the risk to lenders. Equifax Canada and TransUnion are the two major credit bureaus used in Canada.
 
CREDIT SCORE WEIGHTING! WHAT MAKES UP YOUR CREDIT SCORE?
 
The biggest part of the score (35 per cent) is your payment history.

This shows if you pay bills on time, have any unpaid debts or have been through bankruptcies, consumer proposals or debt management plans. A missed payment for $20.00 has the same negative result then missing an $800.00 payment. TELEPHONE bills are reporting on credit bureau now. Increasing frequency of payment can also help improve your score. If your minimum payment is $20.00 make two payments at $10.00 that month. The lenders & insurers now have VERY LITTLE tolerance for any late payments, regardless of the amount of that missed payment.
 
Another big part (30 per cent) is based on how much you owe.
 
If you carry an $8,000 balance on a credit card with a $10,000 limit – even if you pay the minimum on time each month – your credit score can drop. So, it pays to keep your balances down and not get close to your credit limits. I counsel clients not to exceed 75% of their limit. If you go OVER your limit even by $20.00 and it hits your credit report your score will drop significantly.
 
15 per cent of your credit score is based on how long your accounts have been open and used.
 
You may be a newcomer to Canada with no record of loans or someone whose spouse takes care of all credit transactions. To be seen as a good credit risk, it’s not enough to be approved for credit. You have to use the credit you’re given, and lenders like to see you have at least 2 revolving credit facilities for at least 2 years demonstrating good repayment history unless you are newcomer to Canada.
 
Another 10 per cent of your credit score depends on the balance between revolving credit (such as credit cards) and instalment loans (such as mortgages or car loans).
 
Lenders like to see both types of credit. Revolving credit can be maxed out (shouldn’t be) since the rates are high enough to absorb losses, while loans with fixed payments are monitored more closely.
The remaining 10 per cent of your score is based on how much new credit you’ve obtained or applied for. This shouldn’t be too high a percentage of all the credit shown on your file.
 
If you’re shopping for credit it is best to use a BROKER—Why?

One credit check is done as opposed to you going lender to lender and each time, they pull your credit and lower your score. I have access to 20+ lenders and pull your credit ONCE!
 
When you pull your OWN credit, it does not LOWER your score. Lenders will do their own credit check but if you pull it and take it with you or allow me to view it I will be able to quickly determine any obstacles and coach you to improve your score, advise you on how you can proceed and what options are available. And, more importantly what steps you need to take to improve your score and credit report.
 
Banks may give the three-digit number if you ask, but they’re not supposed to give the context that goes with it. Many of the lenders DO NOT have a detailed report. Many people ask me how long the information stays on their credit before it drops off. These are the rules as it applies to each of the following as per Equifax Canada. Bankruptcy automatically purges 6 years from the date of discharge in the case of a single bankruptcy. We see it come of the credit report after 7 years. All accounts included in the bankruptcy should be purged as well. Second Bankruptcy 14 years from date of discharge.
 
Registered Consumer Proposal will automatically purge (3) year from the date paid. Judgements, Seizure of Movable/Immovable, Garnishment of Wages will automatically purge from the system (6) years from the date filed. Secured Loans/PPSA will automatically purge from the system (6) years from the date filed. Voluntary Deposit-Orderly Payments of Debts, Credit Counselling is paid it will automatically purge for the system (3) years from the date paid.

CURRENT RATES

CURRENT RATES
Term Our Rate Bank Rate
2 YEAR 3.19% 3.74%
3 YEAR 2.89%* 3.89%
4 YEAR 3.29% 3.94%
5 YEAR 2.79%* 5.59%
5 YEAR variable 2.90%* %
18 Jun 2019


*Special conditions apply. Interest rates are provided for information purposes only and are subject to change without notice.

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