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. This means that having a higher credit score is an advantage since it signals to lenders that the borrower have higher chances of repaying the loans as per the agreed terms. Borrowers with a higher credit score benefits from fast loan approval due to there being lenders with minimum credit requirements. One also gets favorable terms of such loan such as lower interest rate when getting mortgage in Canada . That said credit score is calculated based on important factors which plays a crucial role in determining the overall credit score.
One is the payment history. Payment history is an important factor that significantly impact one’s overall credit score. Lenders mostly consider this factor before approving a borrower for financing. Alot of late payments typically affects the overall credit score. It’s good to decrease such late payment cases and avoid carrying credit balances. This tend to have an adverse effect on the credit score with regard to home equity. One have a chance of recovering their credit score by making quick payments.
The next factor affecting credit score in Canada is credit utilization. It entails the ratio which encompasses the debt one have access to as well as home equity line of credit . Typically lenders highly consider whether a borrower make use of a higher percentage of available credit funds due to there being a chance of them missing especially those with alot of payment. Lower score is due to higher debt.
Credit history. It encompasses the length of time that has a particular credit and the time it has been on 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. Those with recent entries in the report have a low credit score.
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. Multiple application of new financing in a short period of time tends to drop ones credit score.