Elements that Impact on Credit Score in Canada
The ability to borrow money plus the loan terms are highly influenced by one’s credit score. In this case there has been an increased misconception with regard to what does and does not affect the score. Lenders basically use numbers termed as credit scores to determine ones creditworthiness which tend to be numerical representations in one’s credit report. Having a higher credit score is beneficial in the sense that the lenders concludes that borrower will be able to repay the loan 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. 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.
Among such factors affecting credit score is 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. Multiple late payments drastically drop ones credit score. It’s good to decrease such late payment cases and avoid carrying credit balances. Therefore it’s good to avoid missing a loan or credit card payment. One have a chance of recovering their credit score by making quick payments.
Another factor is credit utilization. This is that ratio including amount of the debt one have access to as well as that currently in use. Lenders also take into account whether one uses a high percentage of available credit funds given that there is a higher chance of a borrower who frequently owns a lot missing a payment. It means that bad credit mortgage lower the credit score.
Credit history. It encompasses the length of time that has a particular credit and the time it has been on the credit score. This means the longer one had a specific loan it positively impacts the credit score as long as one is in good standing with such credit source. Seeing the history of one ability to pay the loan is what lenders want. 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.
The last factor is 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.
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