There is much need for one to have a good credit since it impacts on the ability to borrow money and the loan terms that one may have access to. Many people think differently on what has effect or not on one’s credit score. Credit Score is therefore the numbers used by lenders to determine the borrowers creditworthiness since they act as numerical representations in 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. It also helps one get favorable loan terms including low interest rates than those with lower credit score. The following is a list of some factors that affect credit score in Canada.
One is the payment history. This is the major factor that has the most significant impact on one’s credit score. Before a borrower approval for financing lenders have to consider this factor. Multiple late payments drastically drop ones credit score. It’s good to decrease such late payment cases and avoid carrying credit balances. It’s good to ensure that one never misses a loan or credit card payment since this has a positive impact on the credit score. Since such late payments stay on report for seven years one can recover their score by paying such debt quickly.
Another factor 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.
Credit history also affects one’s credit score. 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. Lenders mostly want to see a history of one being able to pay ones loan. Therefore having recent entries on the report does not give lenders a chance to see one’s ability to pay off the loans in the long term.
New credit. Lenders typically look at the amount of new credit that a borrower has when they are applying for financing. It helps see how one shop their credit. Low credit score is brought about by alot of new financing application in a short period of time.