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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. 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. There is also a chance to benefit from favorable loan terms like low interest rates. 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. Lenders mostly consider this factor before approving a borrower for financing. Alot of late payments typically affects the overall credit score. It means that regularly missing payments as well as carrying credit card balances decreases ones credit score. This tend to have an adverse effect on the credit score with regard to home equity. One have a chance of recovering their credit score by making quick payments.

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. There is need to keep the balances low since the higher the debt the lower the score tend to be.

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. 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.

The last factor is new credit. It’s also a crucial factor that is highly looked into by lenders. 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.

Refer to: https://alpinecredits.ca/how-types-of-debt-affect-credit-score/