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16 Apr

Credit Score and Report Overview


Posted by: Darick Battaglia

Credit Score and Report Overview

Have you ever wondered how your credit score is calculated? Have you ever asked, but are always given vague answers? I will tell you exactly how credit scores are determined for Canadian credit users. Over the next 4 months I intend to inform, educate and coach you through on how to increase and maintain your credit score to at least a minimum of 680. The reason for choosing the benchmark of 680 is simply because the federal lending guidelines and policies provide more debt servicing leverage for borrowers with a score of 680 or more.  I want you to have that option when it comes to purchasing or re-financing your property.  It’s just one less things to worry about when it comes to the intricate process of mortgage applications.

Over the next 4 months we will cover topics such as:

  • 1. What is a credit report?
  • 2. What is a credit score and how is it calculated.
  • 3. How to repair, increase and maintain your credit score: The Do’s and Don’ts.
  • 4. Common myths about credit scores.

Good credit score and overall report = Maximum Opportunities!

  • Get better mortgage rates; access to more funds for a nicer home.
  • Saves you thousands in interests.
  • Allows for faster approvals.
  • Makes it easier to attain credit.
  • And can even be the difference in your career.
Beacon Score Interest Rate Monthly Payment Total Interest
Cost 5 Yr Term
Balance End 5 Yr
599 or < 5.50% $1,831.17 $77,433.02 $267,562.82
680 or > 2.89% $1,402.86 $40,051.13 $255,879.53
Difference 2.61% $428.31 $37,381.89 $11,683.29

You see the difference your credit score can make. There is a significant amount of money you can save by having good credit. Interest rates is something you cannot control, but your credit score is. Why not opt to save thousands and provide yourself the best opportunities.

What is a Credit Report

A credit report contains information about you; DOB, SIN, past/present addresses, employment, types of credit issues (credit cards, loans, LOCs etc) and total amount of inquiries you have made to obtain credit. A credit report also details balances along with repayment history. Basically a lender wants to know what is the probability that they will be repaid. Creditors and financial institutions report to the credit bureau every month. There are 2 agencies that receive and compile this data, Equifax and TransUnion. You’re probably asking yourself now, who has access to this sensitive information. Credit grantors, employers landlords, insurance agents and utility companies all do but only when consent is granted by you.

Here is an example of a real credit report. This part of the report details the score (not good) and address. I have omitted their birthdate and SIN.

This part of their credit report displays the creditors executing their credit checks along with his/her type of employment. This person seemed to be seeking alternative credit over the past 3 years. There were 4 collections listed.

In this credit report snapshot it details the creditor, when you applied for the credit, limit, balance and minimum payment along status and the last time the trade or creditor reported it to Equifax. Along with making the necessary payments one if required to make them on time, this being once a month. The R2, R3 and R4 mean that it was 2 months late etc…