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. In this case there has been an increased misconception with regard to what does and does not affect the score. The main categories of debt are secured debt, unsecured debt, installment debt and revolving debt. 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. In addition it increases the chance of one’s loan being approved given that there tend to be some lenders with minimum credit score 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. It adversely affect one’s credit score rating it as low or high. Before a borrower approval for financing lenders have to consider this factor. There is an increased drop on one’s credit score by multiple late payments. 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. 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. 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 also affects one’s credit score. 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. 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. Application for new financing in multiple times in a short period of time lowers one’s credit score.
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