Beacon Score Basics

Beacon_chartThe MyVirtualMortgageBroker site now has an informative overview of Beacon scores, what affects them, and what you need to do to keep yours high.

  1. is it true that if one has a collection the beacon cant go beyond 650
    what are the ways to get it back to 720 plus

  2. Equifax offers FICO, not Beacon, scores on their website. I was wondering if they were the same, but based what I read on wikipedia, the numbers aren’t quite the same. I didn’t see any reference to Beacon scores on Equifax’s website.

  3. Hi Anthony,
    It’s a good question. A FICO and Beacon score are basically the same thing. They’re both calculated by Fair Isaac. FICO is a brand name used more in the U.S.–despite it being on Equifax’s Canadian website. In Canada, at least in lender circles, the brand name used most often is “Beacon.” Note: In the U.S. the scoring algorithm is a bit different to reflect the different risk metrics down there.

  4. Hi Anthony,
    Yes, as noted above, the Beacon and FICO score have slightly different algorithms. However, they are very similar and are both based on the Fair Isaac Risk Model.
    I’ve heard the average scores for each are within (roughly) 20 points of each other. I can’t verify this because Equifax doesn’t tell anyone, but it’s not that far off.
    Cheers, – rob

  5. Are you automatically disqualified from renewing a mortgage if you have declared bankruptcy within the last year. My mortgage is up for renewal and I am worried even though I have continue to make my payments each month.

  6. @Louise S.:
    No, you are not automatically disqualified. If your mortgage company offers you a renewal, you are certainly allowed to continue your mortgage with them.
    If your mortgage company is still renewing its Canadian mortgages (i.e., it is not one of the American mortgage companies that has ceased to do business in Canada), you are likely, but not guaranteed, to receive an ‘automatic’ renewal. Mortgage companies do not usually review your consumer credit situation when they are issuing renewals, but instead rely on your mortgage payment history.
    Hope this helps.

  7. After you have been discharged from bankruptcy, what is the best way to get your credit re-established?

  8. Hi Don,
    The typical path is to get a secured credit card. You’ll then want to get a 2nd account (credit card or other reporting loan) after some a period of time.
    Very generally speaking, lenders like to see:
    * At least two years of re-established credit (a few permit less but the rates are usually higher)
    * A minimum of two accounts being re-established
    * Credit limits of $1500-$2000 or more on each account
    And whatever you do, never be late on another payment again if you can help it.

  9. I have an Equifax score of 635 and my husband’s is 626. We’ve been at our jobs for over 10 years…could we potentially qualify for a 5% down mortgage through a broker?

  10. Hi Tiffany,
    The minimum Beacon for 95% financing is 600-610, with occassional exceptions possible.
    There’s a bunch of other factors that go into an approval as well. You’d probably be best served by consulting a mortgage planner for a quick pre-qualification.

  11. Here are some beacon score tips just from being a consumer who has used credit since the 80’s:
    1. Even if you have to scrape up the $20.00 minimum payment from the change you’ve lost in your sofa, ALWAYS pay the minimum payment every month on EVERY debt. Paying double the minimum payment one month doesn’t mean you can miss the next payment. Missing ANY minimum payment will easily drop your score 20 points.
    2. If you need a personal loan for 5,000, get one for 10,000 and immediately pay the extra 5,000 off your loan. Doing this will add 20 points to your credit score as it looks great to the credit bureau whose records will show that you owe less than 50% of your original loan.
    3. Don’t max out one card and keep a nil balance on a second card. Doing this will cost you 15+ points even though your debt load is the same. Keep both cards below 50% of their limit. The credit bureau’s scoring system hates it when you have a credit card balance over 70% of your limit.
    4. Know your credit card statement dates and make sure your balance is lowest on the statement date and that you are never over your limit on your statement date. This is because most credit cards report your statement balance as the amount you owe, even though your balance may fluctuate during the month.
    5. Never pay only part of an old debt just to get a collection agency off your back. The date of last activity will be reset to the current date and the bad debt will take another 6 years to drop off your credit report.
    7. Dispute any incorrect or old items. Some lenders will try to keep you from getting credit by reporting your bad debt from 10 years ago even though they’re only allowed to report it for up to 7.
    8. Only apply for credit when you need it. Applying for credit is the silent beacon killer. Stick with mainstream credit cards too. Non prime lenders who report to the credit bureau raise the eyebrows of your future prime lenders.
    For example, if ABC Credit Rebuilding Inc. shows up on your credit report, even if your payment history is excellent, you’re going to get lots of questions when all the bad stuff drops off your credit report and you’re in the position to obtain the best interest rates.
    Generally, if your beacon score is above 700, you’ll be treated as a good client and a low risk. Keep in mind that even with a very high beacon score of 770+ that lenders are still trained to probe for signals that your financial position may soon change. They’ll ask questions about debts that may not be reported to the credit bureau, such as a mortgage, that may indicate a high debt service ratio. Following the above advice will keep your score above 700.

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