Of Prime Interest: Beacon sums up your credit worthiness

…your credit can be fixed and there are still lenders willing to grant mortgages to the credit challenged.

  • Jan. 13, 2016 11:00 a.m.

Beacon scores are a single number that summarizes your credit situation as a borrowing risk for lenders.

Beacon scores can range from 300 to 900. The average Canadian has a beacon near 700.

Only 11 per cent of Canadians rank above 800 and it’s virtually unheard of to see a beacon near 900. You want to be in the 650 to 700 range to qualify for a good mortgage rate.

Even a 600 score will get you a decent enough deal if you can prove income and haven’t had any credit delinquencies for at least a year. This is the average minimum credit score to qualify for good rates on mortgages with less than a 20 per cent down payment.

If your score falls below 600, you are what lenders call a “B” client, meaning there are issues with your credit that banks won’t like.

While one out of five Canadians are in the below 600 score boat, don’t despair if that includes you as your credit can be fixed and there are still lenders willing to grant mortgages to the credit challenged.

Also, keep in mind the exact score needed depends on the type of mortgage you require. For example, mortgages for the self-employed or for rental properties often require scores on the higher end.

Assuming you want to improve your credit, this is how the Beacon formula is calculated.

The main criteria are as follows.

Payment history (35 per cent) —this also factors in the recent and number of payments over 30 days late, collections, judgments and bankruptcies. A single 30-day late payment can drop your score 15 to 20 points.

Current debt (30 per cent) —considers how much you currently owe compared to your credit limits. How many creditors you owe money to and how much you could owe if you maxed all your available credit.

Age of accounts (15 per cent)—the longer your accounts have been opened the better. Generally you need at least two accounts over one year old.

Type of credit (10 per cent)—bank loans, credit cards and revolving credit all impact you differently.

Credit enquiries (10 per cent)—numerous credit applications in the past 12 months is a no no. Huge benefit of a mortgage broker is they pull your credit only once for multiple lenders.

Besides bankruptcy, the top Beacon score killers are payments over 30 days late, maxing out credit cards. (i.e. using over 70 per cent of your limit) and

seeking too much credit in a short period of time (i.e. applying for four credit cards in one month).

If you have a lot of maxed out cards, bring them at least below 70 per cent of their limit—below 50 per cent is better and below 30 per cent is best).

Your credit score can jump considerably in as little as a month.

The moral lesson behind Beacon scores is to know your credit score and manage it carefully. More than 70 to 80 per cent of Canadians have errors on their credit report so don’t be afraid to check your score at www.equifax.com.

Just Posted

Kelowna talent goes to international stage

Julia Chambers is now attending Tisch at New York University

Break and enter suspect nabbed with help from Kelowna witness

The woman recognized the suspect’s vehicle

Ignoring climate change poses potential catastrophe for B.C.

Fisheries scientist says ‘extraordinary challenges’ in water management lie ahead

Person hit by vehicle in West Kelowna

The incident occurred Thursday afternoon

Despite legislation to introduce it, Kelowna plans to keep up call to scrap speculation tax

City says it will keep working with other municipalities affected by the tax

B.C. NDP retreats again on empty-home tax for urban areas

Rate reduced for all Canadians, dissident mayors to get annual meeting

Watch it again: Kelowna mayoral candidates square off

Missing the LIVE Kelowna mayoral debate watch now

Jets score 3 late goals to beat Canucks 4-1

Winnipeg ends three-game Vancouver win streak

Okanagan water conference builds connections

Experts gathered to discuss water and fisherie sustainability objectives

Two B.C. cannabis dispensaries raided on legalization day

Port Alberni dispensaries ticketed for “unlawful sale” of cannabis

Canada not sending anyone to Saudi business summit

Sources insist Ottawa never intended to dispatch a delegation this time around

Earthquake early-warning sensors installed off coast of B.C.

The first-of-its kind warning sensors are developed by Ocean Networks Canada

VPD ordered to co-operate with B.C. police watchdog probe

According to the IIO, a court is ordering Vancouver police to co-operate with an investigation into a fatal shooting

B.C. woman looks to reduce stigma surrounding weed-smoking moms

Shannon Chiarenza, a Vancouver mom of two, started weedmama.ca to act as a guide for newcomers to legal cannabis, specifically mothers

Most Read