Understanding Credit

Credit Rating

Your credit rating (usually referred to as a Beacon Score) is obtained by one of two companies in Canada, most likely Equifax. This Beacon Score is used by most lenders to help them decide whether or not you're a good credit risk. Equifax crunches the numbers from your credit report, and spits out a score somewhere between 300 and 850. A low score says you're a bad credit risk, a score of 680 or higher puts you in the a great position.

Here are some of the factors considered when calculating your credit score and an estimate of how heavily each factor might be weighted.

• Past payment history (35 percent): bankruptcies, late payments, and past due accounts
• Amount of credit owing (30 percent): amount owed on accounts, proportion of balances to total credit limits
• Length of time credit established (15 percent): time since accounts opened, time since account activity
• Search for and acquisition of new credit (10 percent): number of recent credit inquiries, number of recently opened accounts
• Types of credit established (10 percent): number of various types of accounts (credit cards, retail accounts, mortgages) Present but unused improves your credit score

To repair and maintain your credit rating:

• Pay your bills on time. Delinquent payments and collections can have a major negative impact on a score.
• Keep balances low on credit cards and other "revolving credit". High outstanding debt can affect a score.
• Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix -- it probably won't raise your score.
• 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.

Make sure the information in your credit report is correct. It won't affect your score to request and check your own credit report. If you find errors, contact the credit reporting agency and your lender.

Crown Mortgage Consultants can help make the impossible possible.

Our mortgage brokers are experts in helping all individuals find and receive approval for mortgages to make their lives better. In most cases, approval isn't too difficult to achieve. Worst case scenario: a person who is a very high risk, has many strikes on their credit report and evidence of a slow repayment history can still be approved, with slightly higher rates than a person with a flawless credit report.