Do you have an idea what your credit score is? Many things actually depend on it including your ability to obtain credit card or buy a home. Most importantly, how much do you actually know about credit scores?
Let us try to educate ourselves on how credit rating processes work in some of the best credit repair companies.
According to Le Fevre, the director of operations at Equifax Canada, “The biggest component in delivering a score is the payment history of that consumer. So that includes: is everything paid on time? Has there been a late payment or periodic late payments?”
Note that the payment rating system ranges from 0 to 9, with zero as a new account. If you pay within a month after the due date, you’d have an R1. If you’re below 30 days late; however, this information may not even reach Equifax.
If your 1 to 2 months past your due date; you will move down to R2; 4 months past the due date, however, will drop to R5. This continues down until you reach R9 which is grounds for closure of your account due to non-payment.
Edmonton mortgage broker, Natalie Wellings, said, “Another big thing is how close your balance is to your limit. If you are close to your limit, your credit score drops. So whether your limit is $500 or $5,000, when you are close to your limit, it drops your score.”
Another component for good credit scores is that when the longer you keep your account and the longer you keep up with good payment behaviors, such as no late payments, the better your credit scores will be.
Note that the different types of credits you have will definitely carry different types of weight.
“You look at a mortgage, every month, the amount owed will come down because of the payments being made,” says Le Fevre.
Meanwhile, you can easily max out your credit card or have a huge cellphone bill in any given day. Thus, there is more risk involved.
While it is true that every time your credit gets checked, your scores would drop a little, it is not to the extent that you actually imagine. When looking around for mortgage, there’s this belief that going to mortgage brokers than banks is better primarily because they only check your credit scores once to apply to multiple lenders.
According to Le Fevre, you shouldn’t fear on shopping around. “When you’re applying for a car loan or a mortgage, the system recognizes that you may be… going to multiple locations,” he said.
You may check credit ratings through free regular credit reports. The information they provide will alert you whether there are any suspicious activities on your account that may have an effect on your credit.