The Path To Finding Better

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. 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. Borrowers with a higher credit score benefits from fast loan approval due to there being lenders with minimum credit requirements. It also helps one get favorable loan terms including low interest rates than those with lower credit score. 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.

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. Multiple late payments drastically drop ones credit score. It’s good to decrease such late payment cases and avoid carrying credit balances. It’s good to ensure that one never misses a loan or credit card payment since this has a positive impact on the credit score. However it’s possible to recover one’s higher credit score by making quick payments to such debt given that such late payment stays on report for seven years.

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 . It’s good to avoid using a higher percentage of available credit funds since it lowers one chance of getting the loan due to such missed payments. Lower score is due to higher debt.

Credit history also affects one’s credit score. 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. 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. Lenders mostly want to see a history of one being able to pay ones loan. It means that recent entries in the report does not give a chance to see borrower ability to repay the loan 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. They have a chance to see one’s ability to shop new credit. Low credit score is brought about by alot of new financing application in a short period of time.