I thought these 2 articles might be of use:
Your credit score is a three-digit number that can determine whether or not you get a loan and at what rate.
Many insurance companies also use credit scores to decide what you pay to protect your home and belongings from damage.
So, what does your credit score say about you? How can you get it? And how can you improve it?
Credit scoring was developed by Fair Isaac & Co. in the United States to help credit bureaus assess the risk to lenders.
Equifax, one of Canada’s two major credit bureaus, is licensed to use the FICO score, known as the Beacon score here. Its rival, TransUnion, uses a slightly different score (called Empirica).
Your credit score is not the same as your credit report, which shows your payment history. The credit report is free for you to check, but you can’t get your credit score without paying $15 to $25 or so to check it online.
Ignore any offers of free credit scores. They’re only teasers to sell you something else, such as a monthly credit monitoring service.
Eric Putnam spent 26 years in consumer lending before starting a company, Debt Coach Canada. He charges a monthly fee to people who want help organizing their finances and improving their credit scores.
I asked him what goes into a credit score – a secret guarded carefully by the credit bureaus.
The biggest part of the score (35 per cent) is your payment history, he says. This shows if you pay bills on time, have any unpaid debts or have been through bankruptcies, consumer proposals or debt management plans.
Another big part (30 per cent) is based on how much you owe.
If you carry an $8,000 balance on a credit card with a $10,000 limit – even if you pay the minimum on time each month – your credit score will drop. So, it pays to keep your balances down and not get close to your credit limits.
Another 15 per cent of your credit score is based on how long your accounts have been open and used. You may be a newcomer to Canada with no record of loans or someone whose spouse takes care of all credit transactions.
To be seen as a good credit risk, it’s not enough to be approved for credit. You have to use the credit you’re given.
Another 10 per cent of your credit score depends on the balance between revolving credit (such as credit cards) and instalment loans (such as mortgages or car loans).
Lenders like to see both types of credit. Revolving credit can be maxed out since the rates are high enough to absorb losses, while instalment loans with fixed payments must be approved and supervised closely.
The remaining 10 per cent of your score is based on how much new credit you’ve obtained or applied for. This shouldn’t be too high a percentage of all the credit shown on your file.
If you’re shopping for credit, do it within a 15-day period, Putnam says, since that will show as one credit inquiry.
Otherwise, do your shopping with a copy of your credit score, which you can show to lenders to find out what they will offer you.
Banks may give the three-digit number if you ask, but they’re not supposed to give the context that goes with it.
For information, go to www.equifax.ca and www.transunion.ca. You can also read the Financial Consumer Agency of Canada’s publication, Understanding your Credit Report and Credit Score, at www.fcac.gc.ca.
Canadians are at their highest debt load ever, second only to the U.S. out of the G7 countries.
Now is the right time to consolidate your debts and give them the security they need.
*Canadian households carry the second highest debt load relative to what we own of the G7 countries, according to a report from Scotia Capital. The first place belongs to households in the U.S.
“On household leverage, we’re not so bad – compared to the worst example in the developed world,” economists Derek Holt and Gorica Djeric said Thursday.
In the second quarter of 2010 the average amount of debt carried by Canadians was about 20 per cent of the value of everything they owned, compared to about 26 per cent for the U.S. in the first quarter in 2010.
Debt included mortgages, credit cards and lines of credit and the assets measured included homes, cars and financial assets.
Canada’s leverage ratio jumped when the federal government “liberalized the mortgage insurance sector” in spring 2007, hit a plateau in late 2008 to 2009 and has recently begun marching upwards again, according to the report.
“The result is that Canadian households are slightly more leveraged than U.K. households, and significantly more leveraged than households in Japan, Germany, France and Italy,” said the authors.
“We only look good compared to the U.S., and that may well not last,” said the authors, noting the ratio in Canada is expected to increase as debt rises and home prices soften.
The authors acknowledged that home ownership could potentially skew studies comparing debt and wealth in G7 countries. But said looking at debt as a percentage of total assets essentially neutralizes that effect.
Kul Bhatia, professor of economics with the University of Western Ontario, cautioned against giving too much weight to any activity that took place during the recession.
“Those were extraordinary times, with all kinds of things happening in the economy and the job front and the housing market and so you really cannot say very much looking at these numbers.”
Compared to the rest of the G7 countries, the Canadian economy came through the recession relatively unscathed and has better economic prospects, he said.
“If that happens then this household debt would not be a matter of concern. So the best thing is to wait and watch and see how the Canadian economy fares in the next few quarters.”
While the economy continues to improve Canadians are not proving to be frugal.
On Monday, Statistics Canada reported that in the second quarter of 2010 Canadians had racked up $1.48 trillion in household debt, up 6.9 per cent or an increase of $96 billion from the same time last year.
The same day the Canadian Payroll Association said that 59 per cent of Canadians are stretching their pay to the limit and expect they would be in financial difficulty if their pay was cut or delayed by one week.
I thought you can read this and keep them in mind for your current and future financing needs.
Our 5 year fixed is now at 3.50%…. 3 year fixed 2.79%….and Variable is Prime -.75 = 2.25%….With these rates the time is now if you are looking for a great mortgage option.