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Elements that Impact on Credit Score in Canada

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. Credit Score is therefore the numbers used by lenders to determine the borrowers creditworthiness since they act as numerical representations in 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. 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. Before a borrower approval for financing lenders have to consider this factor. Alot of late payments typically affects the overall 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.

Credit utilization. It entails the ratio which encompasses the debt one have access to as well as home equity line of credit . 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. Credit score tend to be affected by the length of time one has loans and for how long it has been on credit report. 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.

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.