Calculating Credit Scores
Credit scores help Financial Risk Managers, and other financial analysts make justified decisions concerning whether to "take a risk" on someone or not. Several scoring models are used globally; however, they are all similar in principle. This article breaks down the primary factors involved in calculating a credit score.
Payment History (weight = 35%)
A Payment History includes information concerning how well a debtor repays the amount borrowed. This data consists of the number and type of credit accounts paid on time, how many extensions they've taken, late payments, public record items and recovery. Credit scoring models analyse delayed payment duration, how many payments you delayed, the amount owed, and how recently you missed a payment.
Used Credit vs Available Credit (weight = 30%)
A crucial part of your score involves comparing your total available credit (credit cards and other revolving lines of credit) and how much you have used. If you were wondering, a 'revolving line of credit refers to any type of loan that allows a borrow, repay, and reuse cycle up to the available limit. This factor also considers the maximum amount you can charge in a single transaction against a particular credit account.
Credit History (weight = 15%)
This modelling factor considers how long you've been borrowing, i.e. your credit career, so to speak. The longer you've been a debtor with a good reputation, the better your score.
Public Records (weight = 10%)
Financial institutions have access to anything you've ever done that is legally part of public record (open to all concerned). This data includes any bankruptcy, collection issues or run-ins with the law. The presence of these events may significantly and negatively impact your credit score.
Inquiries (weight = 10%)
Inquires are logs maintained on an individual's credit file every time an institution or organisation accesses the individual's data. Although these inquiries require mutual consent, it was created to affect the credit score calculation. Inquiries generated due to active credit-seeking (known as "hard pulls" or "hard hits") are an indication of financial distress and, therefore, a red flag. Although not every inquiry is a sign of financial difficulty. For example, a creditor has made requests for your credit file or credit score to create a pre-approved credit offer or review your account with them. Nor does it consider a personal proposal for a copy of your credit history. These are some examples of "soft inquiries" or "soft pulls" of your credit.
Several recent instances could lead to a significant decline in your credit score.
Contact me if you have any further questions to discuss.
Rodney Schunker | Mortgage Broker (Lic. M12000165)
Cell: 416-697-6423 | Toll Free: 1-855-787-7723
Fax: 1-855-787-7723 | Web: www.kingdommortgages.ca
Mail: 10 George St North, Suite 202, Brampton L6X 1R2
Email: schunkerr@gmail.com
Source: https://www.consumer.equifax.ca/.../how-are-credit.../
Rock Capital Investments Inc. Brokerage #10556. Each office is independently owned and operated. Proud member of Mortgage Centre Canada.
Kingdom Mortgages Inc Brokerage #13608. Each office independently owned and operated. Proud member of Mortgage Centre Canada.
USEFUL LINKS
TEAM MEMBERS
Rodney Schunker
John Fernandes
Maria Schunker
Curtis Hinds
David Schunker
Jonathan Schunker
Ukamaka Ezeude (Amaka)
CONTACT US
2250 Bovaird Drive E, Suite 304, Brampton L6R 0W3
Our team helps clients secure mortgages in Ontario, Alberta and select states within the US