Is your Credit Score the score you think it is?
The answer is probably not. Equifax Canada uses 6 different types of credit score algorithms(mathematical formulas used to calculate the score) which are used by different lending industries. For example the auto industry uses a different type of score than the mortgage industry. When you, as a consumer, request your score from Equifax Canada you receive the Equifax Risk Score(ERS) algorithm. The ERS score you receive will be either version 1.1 or 2.0. The problem with this score is that it is only used by approximately 25% of the Canadian mortgage industry. The ERS score is lower than the preferred Beacon 9 score used by the majority of Canadian mortgage lenders. So what does this mean to you? If you have excellent credit, absolutely nothing. However, in the event you are trying to rebuild damaged credit this means everything. For example, you contact Equifax and obtain your score of 590(ERS). At first glance a score of 590 would mean that you wouldn’t qualify for an insured mortgage which would mean you would need 15-20% down payment. However, if we were to convert the ERS score to the new Beacon 9 score you would end up with a 602. A score of 602 would enable you to qualify for an insured mortgage allowing 5% down. On a $250,000 home this would reduce your required down payment from $50,000(20%) to $12,500(5%). This is why it is important to work with a competent mortgage broker who recognizes these subtle differences within our credit system.
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*The Canadian Beacon Score is derived from the USA FICO Score system. Here is a FICO Score video(the USA use different names) that explains the differences between different score algorithms.