Shining a light on your Beacon Score
If you’re in the market for real estate, it’s crucial to be aware of your credit rating and make sure it works in your favour
When it comes to buying real estate, location, budget and taste are all factors that come into play. But whether you’re looking for a starter home, investment property, or luxurious mansion, you typically need to be able to get a mortgage in order to acquire the property. That’s where your Beacon Score comes into play.
Never heard that term before? You’re not alone. In fact, many people don’t
Your Beacon Score “is a number ... that dictates things like your borrowing capacity and worthiness based on information including your payment history.”
know what a Beacon Score is — nor have they ever inquired about their own, said Monique Noble, real-estate broker at Via Capitale Centre in Laval.
“A Beacon Score is your credit rating,” she explained. “It’s a number between 300 and 900 that Canada’s two credit bureaus calculate, using a formula that dictates things like your borrowing capacity and worthiness based on information including your payment history.”
TransUnion Canada and Equifax are the two credit bureaus in Canada. A good credit score is commonly thought of as hovering around the 680 to 750 level; above 725 is very good, and upward of 750 is deemed excellent.
“If you’re lower than 680, you’re considered borderline,” Noble said. “When you get to that range, lenders will start to question you.”
Anyone with a credit card has a credit history, and everybody with a social insurance number generally has one as well. If you want to finance a car, buy furniture using a store card, or get a mortgage, you need to have a Beacon Score.
There are many reasons why it’s important to be aware of your credit score; in fact, experts recommend doing a credit check annually.
“I cannot emphasize enough how crucial it is for people to know where they stand when it comes to their credit,” Noble said. “It’s hugely important to verify because, for one thing, it’s a means of discovering fraud. When someone opens a credit card in your name, it gets added to your credit report and people often only find out about it when they actually see their report.”
In addition to fraud, it’s also possible for errors to be incorporated into your Beacon Score. Even errors that seem minor, such as a misspelled name or a wrong address, could cause problems when you apply for credit.
“For example, it happens that people erroneously think they’ve closed a credit card when, meanwhile, there was an outstanding balance,” she said. “That all gets incorporated into your credit score, so it’s easy to see why some are surprised to learn that they don’t have a top credit rating.”
That’s why it’s imperative to make sure that every item on your credit report is accurate. Otherwise the consequences to your credit score can be quite costly and even potentially have an impact on your ability to obtain a mortgage.
“A good credit score can save you thousands of dollars due to the interest rate you’re able to obtain,” Noble said. “The higher your credit rating, the more negotiable your rate is.”
For example, someone with a Beacon Score higher than 720 will have an average monthly payment of $1,077 on a 30-year, fixed-rate mortgage of $250,000. For someone with a credit score of 680, however, that monthly payment would be $1,133. Over 30 years, the difference adds up to more than $20,000.
Items generally stay on your credit report for about six or seven years. So if you’ve had a bankruptcy, or even come close to one, it will be indicated on your report.
“It’s basically an indication of your life-
“It’s a reflection of your habits that allows lenders to see how you live and how you operate financially; it allows them to predict whether or not they think you’re safe to lend to.”
style,” Noble explained. “It’s a reflection of your habits that allows lenders to see how you live and how you operate financially; it allows them to predict whether or not they think you’re safe to lend to. That’s why a bad credit rating can have a huge impact on your life.”
In order to help ensure good credit, Noble recommends keeping the balance on your credit cards at no more than 40 per cent of their limits, while consistently making at least the minimum monthly payments.
“It’s always good to have at least two credit cards and use them responsibly,” she said.
“Doing so and paying your bills in a timely fashion improves your credit over time, which can always be done if the right steps are taken. But the key is first finding out where you stand.”
Obtaining your credit report is typically an easy process. Simply visit the website of either credit bureau, and file a request for your report.
“It doesn’t take long at all and it’s totally worth it,” Noble said. “Knowing your credit information can be extremely valuable when it comes to making life plans, especially if buying a home is in your near future.”