Credit Ratings

Having a good credit rating is absolutely critical in modern society. A poor credit rating can cost you tens of thousands of dollars, or obstruct you from obtaining credit altogether. You can’t secure a mortgage with poor credit and even landlords do credit checks prior to approving tenants. A healthy credit rating will help you get approved for credit for mortgages, car loans, credit cards etc., and the better credit you have, the more you are rewarded with better interest rates.

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How is the Credit Score Calculated?

Your credit score is created by weighing 5 different factors related to your credit profile. Driven by the financial industry’s desire for an equitable method of comparing the credit worthiness of borrowers, Fair Isaac & Co developed a credit measurement tool in the 1950’s called the FICO score. The FICO score is used by most lenders from across Canada and the United States to assess lending risk.

The two most recognized credit reporting agencies in Canada are Equifax and TransUnion with Equifax being the most widely used. Known as a BEACON score at Equifax, and EMPIRICA score at TransUnion, all use the formulas developed by Fair Isaac & Co.

Equifax crunches the numbers from your credit report and issues a score somewhere between 300 and 850. A low score let’s a lender know you are a bad credit risk and a score of 750 or higher is low credit risk.


How Does a Consumer Proposal Affect Your Credit Rating?

The record of a Consumer Proposal stays on a person’s credit report for 3 years from the date in which it has been paid in full. The sooner a Proposal is paid, the sooner credit will be established again. A standard Consumer Proposal is usually paid out over 60 months, or 5 years, which means poor credit for a minimum of 8 years. Even at the 8-year mark, your credit may not be well established unless you have been able to obtain credit and manage it well. Based on this, any Canadian that wants and needs to rebuild their credit needs to pay off their Consumer Proposal as soon as possible.


How the Encore Credit Recovery Loan Helps Canadians

Your credit report is cleaned up in 3 years, rather than the usual 8 years that it takes with a standard Consumer Proposal. This allows you to start rebuilding your credit immediately and even have a strong credit score in 24 months. It’s empowering to be rebuilding and no longer in a Consumer Proposal with a Trustee. You’ve taken back control of your finances.