Factors Affecting Credit Score in Canada
The ability to borrow money plus the loan terms are highly influenced by one’s credit score. This has resulted to many wondering why did my credit score drop. 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. 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 . In determination of one’s credit score there are several factors that are taken into account since there is an impact of debt on 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. Multiple late payments drastically drop ones credit score. To avoid the chances of decreasing one’s credit score it’s good for one to ensure that one do not regularly miss payments and even 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. 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. It means that bad credit mortgage lower the credit score.
Next is credit history. 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. Therefore longer time with such loan impacts positively on the credit score as long as one has a good standing with the source. Having a good history of ability to pay loan is the goal of the lenders. 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. 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.
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