What Affects Credit Score in Canada
Having a good credit is of utmost importance due to it’s adverse effect on one’s ability to borrow money as well as the terms of that loan. Many people think differently on what has effect or not on one’s credit score. Lenders basically use numbers termed as credit scores to determine ones creditworthiness which tend to be numerical representations in one’s credit report. The higher the credit score tend to be an advantage to the borrower since the lenders are confident on their ability to repay the home equity loan within the stipulated terms. The availability of some lenders with minimum credit score requirements benefits the borrower with higher credit score by mortgage pre-approval. There is also a chance to benefit from favorable loan terms like low interest rates. In determination of one’s credit score there are several factors that are taken into account since there is an impact of debt on credit score.
Among such factors affecting credit score is payment history. Payment history is an important factor that significantly impact one’s overall credit score. This factor is highly considered by lenders before they even approve a borrower for financing. Alot of late payments typically affects the overall credit score. To avoid the chances of decreasing one’s credit score it’s good for one to ensure that one do not regularly miss payments and even carrying credit balances. This tend to have an adverse effect on the credit score with regard to home equity. Since such late payments stay on report for seven years one can recover their score by paying such debt quickly.
The next factor affecting credit score in Canada is credit utilization. In this case it refers to the ratio that includes amount of debt one have access to and that in current use. It’s good to avoid using a higher percentage of available credit funds since it lowers one chance of getting the loan due to such missed payments. Lower score is due to higher debt.
Next is credit history. The length of time that one had a particular type of credit and how long it has been on the credit report affects the credit score. It’s good for that specific loan to have a longer time since this affects positively on one’s credit score. Having a good history of ability to pay loan is the goal of the lenders. Those with recent entries in the report have a low credit score.
The last factor is new credit. Mostly lenders look at one’s new credit. The essence for considering this factor is to give lenders a chance to see how one typically shops for their credit. Application for new financing in multiple times in a short period of time lowers one’s credit score.