What is a good beacon credit score
Equifax is one of the larger credit bureau's that compile your credit journals and determine your credit score. Your credit score is referred to as a BEACON Score. The Beacon score is a mathematical formula used to calculate your credit risk level. This score is one of a few formulated scoring systems available to lenders to help them decide whether or not you are a good credit risk. FICO is another scoring system, very similar to Beacon. The Beacon matrix system pulls the numbers from your Equifax (or Trans Union Credit Bureau) report and assigns a score somewhere between 0 and 850. A score under 600 says you're a higher credit risk and a score of 680 or higher puts you in a low risk category with the lender (this is where you want to be).
Below are the factors the Beacon system considers when calculating your credit score
Payment History = 35%
This will factor in the recent history and number of payments over 30 days late, collections, judgments, and bankruptcies. A single 30-day late payment can drop your score 15-20 points.
Current Debts = 30%
Considers how much you currently owe (in absolute terms and compared with your credit limits), how many creditors you owe money to, and how much you could owe if you maxed all your available credit.
The score measures how much you owe on the accounts (revolving, non-revolving, and installment) that are listed on your credit bureau report. Research reveals that consumers owing larger amounts on their credit accounts have greater future repayment risk than those who owe less.
Paying off your debts and maintaining low balances will help to improve your credit score. Consolidating or moving your debt around from one account to another will usually not, however, raise your score, since the same amount is still owed
If you have a lot of maxed-out cards, bring them at least below 50% of the limit (below 30% is best). Your credit score can jump considerably in as little as a month.
The computer only looks at percentages, so if somebody has a credit limit of $1000 dollars and has a balance of $950 on their credit, they would be seen as somebody living too close to their absolute credit limit. It is all relative, because somebody who has a credit limit of $100,000 and a balance owing of $95,000 would get the same credit use score based on using 95% of all available credit limits. So it would be easy to coach somebody with lower limits to either increase their credit limit or lower their balance to less than 70% of their limit, to gain the higher score.
They don’t teach this in college.
Age of Accounts = 15%
The longer your accounts have been opened the better. You generally need at least three accounts over one year old.
The length of time your revolving or non-revolving accounts have been established is too short
This reason is based on the age of the revolving or non-revolving charge accounts on your credit bureau report. A revolving account such as Visa, MasterCard, or retail store card allows consumers to make a minimum monthly payment and roll or "revolve" the remainder of their balance to the next month. Non-revolving accounts such as American Express and Diners Club must be paid off in full each month.
Research shows that consumers with longer credit histories have better repayment risk than those with shorter credit histories. Also, consumers who frequently open new accounts have greater repayment risk than those who do not.
Type of Credit = 10%
Bank loans, credit cards, and revolving credit accounts all impact you differently.
Simply having installment loans and owing money on them does not mean you are a high-risk borrower. To the contrary, paying down installment loans is a good sign that you are able and willing to manage and repay debt, and evidence
of successful repayment weighs favorably on your credit rating. The BEACON score examines many aspects of your current installment loan and revolving balances
Having credit from a bank will give you a better score than credit from a finance company.
Credit Enquiries = 10%
The number of inquiries posted on your credit file in the last 12 months.
Research shows that consumers who are seeking new credit accounts are riskier than consumers who are not seeking credit. Inquiries are the only information lenders have that indicates a consumer is actively seeking credit.
There are different types of inquiries that reside on your credit bureau report. The score only considers those inquiries that were posted as a result of you applying for credit. Other types of inquiries, such as account review inquiries (where a lender with whom you have an account has received your credit report) or consumer disclosure inquiries (where you have requested a copy of your own report) are not considered by the score.
As time passes the age of your most recent inquiry will increase and your score will rise as a result, provided you do not apply for additional credit in the meantime. Our best recommendation - apply for credit only when you need it.
A benefit to dealing with a mortgage broker is that the broker will make one inquiry on your bureau and seek the lending services of as many lenders as needed to make the deal happen. If a customer is rate shopping on their own, for a mortgage, the resulting credit bureau hits can become detrimental to their score and their ability get the best value.
Recent mortgage rulings with the Canadian House of Commons have set clear guidelines for lenders and their insurers in the mortgage industry. One of those guidelines involves CMHC adhering to Beacon Score guidelines of not less than 600. The good news is that for any non-insured lender they can still make judgement calls for any beacon score, depending on circumstance. The bad news is that some people will not qualify for insured high ratio borrowing, because they have not maintained their beacon score. It is a good idea to only apply for credit when you really need it. Meanwhile, maintain low-to-moderate balances and be sure to make your payments on time. Your score should improve as your revolving credit history ages.
Alternatively you can turn to the remaining sub-prime lenders or the Private hard money lenders who base their lending decisions on the equity in your home (or the size of your down payment) and your ability to repay. Rates will be higher for these two options, because investors are factoring in the risk posed by a lack of credit.
Credit bureau reports are usually accurate, but there are times when reports can be incorrect due to technical glitches with the lender's computer feed, stolen identity or mistaken postings. Technical glitches are known to happen if a lender is upgrading a computer system and old information remains stuck in the system (old balances and ratings are never cleared). It also causes duplication of certain account reporting. Through education and media, people are aware that Credit Fraud and identity theft will occur. If you think your identification has been compromised you can call the number below to report identification theft. It will show up on your personal credit bureau and the lender will take extra measures to ensure it is really you making an application. If you live in a home with somebody of the same name, since your address and name are the same, sometimes your credit reports get mixed up too.
Equifax recommends that you monitor your own credit report, by logging in to their site and requesting your own credit information. Do this at least twice a year. If you catch any inaccuracies, you can report them to the bureau for investigation.
How can I correct an inaccuracy in my Equifax credit report?Source: www.realmortgagesolutions.ca