AND CREDIT RATINGS?
by Paul Fortier Driven by the financial industries desire for an equitable method of comparing the credit worthiness of borrowers, Fair Isaac & Co. developed a credit measurement tool in the 1950s called the FICO© score. In Canada they call it Beacon© Score.
Now considered to be the industry standard, the Beacon© score is used by most lenders from across Canada and the United States to assess lending risk.
The two most recognized credit reporting agencies include Equifax and TransUnion with Equifax being the most recognized agency in Canada. Known as a BEACON© Score at Equifax, EMPIRICA Score at TransUnion, both use formulas developed by Fair Isaac & Co.
In general terms, the Beacon© Score evaluated five main categories of information:
Payment history (35% of the overall score)
- Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
- Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items).Severity of delinquency (how long past due).
- Amount past due on delinquent accounts or collection items.
- Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any).
- Number of past due items on file.
- Number of accounts paid as agreed
Amounts owed (30% of the overall score)
- Amount owing on accounts
- Amount owing on specific types of accounts
- Lack of a specific type of balance, in some cases
- Number of accounts with balances
- Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts).
- Proportion of installments loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans).
Length of credit history (15% of the overall score)
- Time since accounts opened
- Time since accounts opened, by specific type of account
- Time since account activity
New credit (10% of the overall score)
- Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account.
- Number of recent credit inquiries.
- Time since recent account opening(s), by type of account.
- Time since credit inquiry(s).
- Re-established of positive credit history following past payment problems.
Type of credit used (10% of the overall score)
- Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.).
Add it up and you get .?
- Each of the above noted factors, along with others, are assigned a value and a weight. The results of these factors are then added up and combined into a single number. BEACON© scores can range from 300 to 800. The higher the number the better.
- In general terms, borrowers with reasonable credit typically have BEACON© scores, which range between 600 and 800.
The Top Killers of Beacon© Scores are:
Bankruptcys, Judgments, Collections, over 30 days late on payments and #1 silent killer is: Drum Roll Please: Over 80% loaned against high credit limits. Who knew?
Credit scores are different because each Bureau may have different data from different creditors, but the scores all measure the same and should be close.
Scoring is not a measure of a borrowers income, assets, or bank account it is based solely on the data within the credit file. Some banks dont even report unless you miss payments.
What do those ratings mean?
(Taken from Equifax.ca FAQ section)
| Rating | What it Means |
| R0 | Too new to rate; approved but not used |
| R1 | Pays (or paid) within 30 days of payment due date or not over one payment past due. This is the rating we are looking for. |
| R2 | Pays (or paid) in more than 30 days of payment due date, but not more than 60 days, or not more than two payments past due. From hereon, These are various degrees of weakening credit. |
| R3 | Pays (or paid) in more than 60 days from payment due date, but not more than 90 days, or not more than three payments past due |
| R4 | Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due. |
| R5 | Account is at least 120 days overdue, but is not yet rated 9 |
| R7 | Making regular payments through a special arrangement to settle your debts. |
| R8 | Repossession (voluntary or involuntary return of merchandise). |
| R9 | Lender has written off the account and forwarded it for collections, possible legal action and judgment. |
Rates For
Fri, Jan 13, 2012
2:32 pm
| 1 Year (Closed) | |
| CIR: 3.09 | Bank: 4.69 |
| 1 Year (Convertible) | |
| CIR: 3.09 | Bank: 4.69 |
| 1 Year (Open) | |
| CIR: 3.24 | Bank: 5.84 |
| 2 Years | |
| CIR: 3.25 | Bank: 3.39 |
| 3 Years | |
| CIR: 3.40 | Bank: 3.69 |
| 4 Years | |
| CIR: 3.49 | Bank: 3.99 |
| 5 Years | |
| CIR: 3.19 | Bank: 3.75 |
| 7 Years | |
| CIR: 4.90 | Bank: 5.31 |
| 10 Years | |
| CIR: 5.14 | Bank: 5.50 |
