Beacon Score Basics
Do you know how much you’ll pay for your next mortgage?
Your Equifax Beacon Score is the criteria lenders use to determine what risk you as a client represent, and hence how much you'll pay for your next mortgage. It’s important to know what affects it.
Beacon scores range from 300 to 900 (a perfect score) with the average Canadian adult having a Beacon near 700.
While many people think you need to be in the 800's to get great mortgage rates, this isn’t the case. In fact, only 11% of Canadians rank above 800, and it's virtually unheard of to see a Beacon near 900. All you really need is a score range of 680-700 to get the best mortgage rates. Even 600 can get you a decent enough deal if you can prove your income and haven't had any delinquencies over the past year.
As of October 15, 2008, 600 is the minimum credit score for insured mortgages. That means you'll need at least a 600 score to qualify for good rates on mortgages which require less than a 20% down payment.
If you’re on the “B” list, you’ve still got options
If your score is below 600, you're what lenders call a "B" client (i.e. there are issues with your credit that banks won't like). 1 out of 5 Canadians are in this boat, but don't despair! Your credit can be fixed and there are still lenders willing to give mortgages to the credit challenged if you have a big enough down payment. We've seen deals get done with Beacons as low as 450!
Also, keep in mind that 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 higher scores.
Factors that affect Beacon Score
Besides the obvious (bankruptcies, judgments, etc.) the top Beacon killers are:
- Payments over 30-days late
- Maxing out credit cards (i.e. using over 70% of a high credit limit)
- Seeking too much credit in a short period of time (i.e. applying for multiple credit cards in one month)
Tip: If you have a lot of maxed out cards, at the very least try to bring totals below 70% of their limit (Below 50% is better. Below 30% is best). Your credit score can jump considerably in as little as one month.
The moral is, know your credit score and manage it carefully. Over 70-80% of Canadians have mistakes on their credit report. Don't be afraid to check yours!