If you want to check your credit score so that you can buy a house or get a loan for a business, you will need to check with all of the three credit bureaus which are Experian, Equifax, and TransUnion.

They each follow variations of the FICO credit scoring system. The beacon credit score is used by the Equifax bureau and this score is based on certain factors of your life including jobs, income, changes of address, enquiries and debts.

The reason that banks will want to see your beacon credit score is that they can assess how able you are to pay back the loan that they provide you. This score will also determine how much the interest rate will be on that loan.

The credit scores range from 400, which is bad, to 850 which is brilliant, but most people range between 600 and 800.

To get a favorable bank loan and good interest rate, your beacon credit score must be above 680. This can save you so much money per year because of the amount of interest that you will have to pay on the loan.

Even though this can be difficult to achieve, the banks do use all three models to ascertain the loan that they give. The factors that are looked at are arranged in the following percentages.

The timeline of your bill payments will count for 35 percent and includes late payments, and missed payments. Outstanding credit accounts for 30 percent and can differ depending on how much the installments are compared to the loan amount.

By reshuffling your money, you can improve your credit score dramatically. The amount of time that your credit has been active accounts for 15 percent.

Just pay them off and keep the account active. They want to see that you have been using your account for more than a year to get better credit results. The type of credit that you have counts for 10 percent so always use a reputable source and do not open too many small finance credit cards.
Please note that the acquisition of new credit can lower your beacon credit score so do not open too many credit cards in a short space of time.

If you want to assess your beacon credit score you can find many places online where you can do just that and have the results instantly.

You can also find calculators that will let you determine your score and help you to improve it before you approach any banks and lenders. The trick to keeping a high credit score is to only take out a loan when it is absolutely necessary and to pay it back on time.

Amortization is the distribution of a single lump-sum cash flow into many smaller cash flow installments, as determined by an amortization schedule. Unlike other repayment models, each repayment installment consists of both principal and interest. Amortization is chiefly used in loan repayments (a common example being a mortgage loan) and in sinking funds. Payments are divided into equal amounts for the duration of the loan, making it the simplest repayment model. A greater amount of the payment is applied to interest at the beginning of the amortization schedule, while more money is applied to principal at the end.

A fixed rate mortgage (FRM) is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or “float.” Other forms of mortgage loan include interest only mortgage, graduated payment mortgage, adjustable rate mortgage, negative amortization mortgage, and balloon payment mortgage. Please note that each of the loan types above except for a straight adjustable rate mortgage can have a period of the loan for which a fixed rate may apply. A Balloon Payment mortgage, for example, can have a fixed rate for the term of the loan followed by the ending balloon payment.

This payment amount is independent of the additional costs on a home sometimes handled in escrow, such as property taxes and property insurance. Consequently, payments made by the borrower may change over time with the changing escrow amount, but the payments handling the principal and interest on the loan will remain the same.

Fixed rate mortgages are characterized by their interest rate (including compounding frequency, amount of loan, and term of the mortgage). With these three values, the calculation of the monthly payment can then be done.

A variable rate mortgage or floating rate mortgage is a mortgage loan where the interest rate varies to reflect market conditions.

The interest rate will normally vary with changes to the base rate of the central bank and reflects changing costs on the credit markets. This method of variation directly linked to underlying costs benefits lenders by ensuring a profit by passing the interest rate risk to the borrower. The borrower benefits from reduced margins to the underlying cost of borrowing compared to fixed or capped rate mortgages where the lender must hedge against potential interest rate changes where the borrower benefits if the interest rate falls and loses out if interest rates rise.

Maturity is the date in which the principal loan balance is due. At the point when your mortgage has reached maturity, your interest and principal is paid for in its entirety. Most loans are processed under the assumption that you will keep it to maturity and make only the required payments for the full life of the loan.

The difference between the current market value of a property and the total debt obligations against the property. On a new mortgage loan, the down payment represents the home equity in the property.

The loan-to-value (LTV) ratio is a mathematical calculation which expresses the amount of a first mortgage loan as a percentage of the total appraised value of real property. For instance, if a borrower wants $130,000 to purchase a house worth $150,000, the LTV ratio is $130,000/$150,000 or 87%.

Loan to value is one of the key risk factors that lenders assess when qualifying borrowers for a mortgage. The risk of default is always at the forefront of lending decisions, and the likelihood of a lender absorbing a loss in the foreclosure process increases as the amount of equity decreases. Therefore, as the LTV ratio of a loan increases, the qualification guidelines for certain mortgage programs become much more strict. Lenders can require borrowers of high LTV loans to buy mortgage insurance to protect the lender from the buyer default, which increases the costs of the mortgage.

CHMC

CMHC is Canada’s national housing agency. When the (LTV) is high than the bank is required to use CMHC as an insurance to the bank’s risk on the loan.

A credit bureau (also called a consumer credit bureau, credit bureau agency, or credit bureau company) is an agency that compiles credit information and distributes it to creditors. Credit bureaus are private profit-making companies that provide credit bureau services to credit card companies, mortgage lenders, and banks that use the information to screen potential applicants.

DEBT CONSOLIDATION

Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house.

Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest. In practice, many people are in credit card debt because they spend more than their income. If that habit continues, the consolidation will not benefit them much because they will simply increase their credit card balances again.

BANKRUPTCY

Bankruptcy is a legally declared inability or impairment of ability of an individual or organizations to pay their creditors. Creditors may file a bankruptcy petition against a debtor (”involuntary bankruptcy”) in an effort to recoup a portion of what they are owed. In the majority of cases, however, bankruptcy is initiated by the debtor (a “voluntary bankruptcy” that is filed by the bankrupt individual or organization).

The primary purpose of bankruptcy is: (1) to give an honest debtor a “fresh start” in life by relieving the debtor of most debts, and (2) to repay creditors in an orderly manner to the extent that the debtor has the means available for payment. Bankruptcy allows debtors to be discharged from the legal obligation to pay most debts by submitting their non-exempt assets, if any, to the jurisdiction of the bankruptcy court for eventual distribution among their creditors. A bankruptcy case is initiated by the filing of a petition, which contains the Debtor’s financial information. A married couple may file a joint petition. Though in a technical sense the filing of a joint petition initiates two separate bankruptcy cases (and estates), the cases and estates are usually consolidated and treated as one.

CONSUMER PROPOSAL

An alternative to bankruptcy

Owing money you cannot afford to repay can be very scary. However, to get your life back to normal, you need to understand your options. While declaring bankruptcy is one way to solve your financial troubles, it is not the only way. Another option you may want to consider is to make a Consumer Proposal.

With a Consumer Proposal, you offer to pay your creditors a percentage of what you owe them, over a specific period of time. Generally, you would make monthly payments to a Trustee, and the Trustee will use that money to pay each of your creditors. The amount you pay depends on your personal situation and the amount of money you make.