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What Affects 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. 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. 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. 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. Lenders mostly consider this factor before approving a borrower for financing. 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. 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.

Credit utilization. It entails the ratio which encompasses the debt one have access to as well as home equity line of credit . 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. Lower score is due to higher debt.

Next is credit history. It encompasses the length of time that has a particular credit and the time it has been on 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.

Lastly is the new credit. Mostly lenders look at one’s new credit. They have a chance to see one’s ability to shop new credit. Multiple application of new financing in a short period of time tends to drop ones credit score.