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At Bennett Capital Group, we are experienced in the aspect of what lenders will require as well as how to improve your credit to get a lower rate.

This consulting will require an action plan and then some time to elapse to have the bureau updated to experience this lower rate result.

 

If you are thinking about declaring bankruptcy or a consumer proposal, call us first. If you own your own home, you may get better results paying things off and not affecting your credit with a proposal or bankruptcy. There are many options, let us review them with a free consulting session.

 

If you are stressed out, or facing financial problems, let us review how to get you over this obstacle and balance your finances.

 

If you are looking to ensure you will get pre-approved or how to correct issues on your bureau, we would love to help!

 

How are Credit Scores Calculated?

 

  • They predict the likelihood that individuals will pay their bills as agreed

  • The main way a bank will determine credit worthiness

  • Payment history, the amount of credit you’re using, and the length of your credit history are factors included in calculating your credit score

 

Credit scores are intended to help financial institutions and others, make a fair decision on whether or not to lend to someone. The risk might involve giving the loan, and based on your score, can determine the lending rate.

 

If you look at your credit scores with our national agencies, Equifax and Transunion, you may see different scores. Each company has multiple scoring algorithms and lenders typically request one or them or both when making lending decisions. The consumer scoring system is not as elaborate as the lending scoring, so best to have us review your credit before making an offer on a home!

 

 

Couple looking at credit score with financial advisor

There are many different scoring models!

 

Here is a general breakdown of the factors the models consider.

Payment History: 35% 

 

Your credit history includes information about how you have repaid the credit you have already been extended on credit accounts such as credit cards, lines of credit, retail department store accounts, installment loans, auto loans, student loans, finance company accounts, home equity loans and mortgage loans for primary, secondary, vacation and investment properties.

 

In addition to reporting the number and type of credit accounts that you’ve paid on time, this category also includes details on late or missed payments, public record items and collection information. Credit scoring models look at how late your payments were, how much was owed, and how recently and how often you missed a payment. Your credit history will also detail how many of your credit accounts are delinquent in relation to all your accounts on file. For example, if you have 10 credit accounts (known as “tradelines” in the credit industry), and you’ve had a late payment in 5 of those accounts, that ratio may impact your credit score.

 

 

Used Credit vs. Available Credit: 30%

 

A key part of your credit score analyzes how much of the total available credit is being used on your credit cards, as well as any other revolving lines of credit. A revolving line of credit is a type of loan that allows you to borrow, repay, and then reuse the credit line up to its available limit.

 

Also included in this factor is the total line of credit or credit limit. This is the maximum amount you could charge against a particular credit account, say $2,500 on a credit card. 

 

 

Credit History: 15% 

 

This section of your credit file details how long your credit accounts have been in existence. The credit score calculation typically includes both how long your oldest and most recent accounts have been open. In general, creditors like to see that you’ve been able to properly handle credit accounts over a period. 

 

 

Public Records: 10%

 

Those who have a prior history of bankruptcy or have had collection issues or other derogatory public records may be considered risky. The presence of these events may have a significant negative impact on a credit score.

 

 

Inquiries: 10%

 

Anytime an individual’s credit file is accessed for any reason, the request for information is logged on the file as an inquiry. Inquiries require the consent of the individual and some may affect the individual’s credit score calculation. The only inquiries which may impact a credit score are those related to active credit seeking (such as applying for a new loan or credit card). These inquiries are known in industry jargon as “hard pulls” or “hard hits” on your credit file. The hard inquiry may be the leading indicator, the first sign of financial distress that appears on the credit file.

 

Of course, not every inquiry is a sign of financial difficulty, and only several recent inquiries, in combination with other warning signals on the credit file should lead to a significant decline in a credit score. When actively buying a car or home, the bureau will not be affected by a few hits to the bureau.

 

Using a mortgage broker means you will have one pull even when multiple lenders are used to apply. It’s a win-win, having your credit reviewed and used once for the best rate and terms available for you. Call us to review your ability to borrow, refinance or stay in your home during financial disruption.

Make your mortgage work for you!