What is a Beacon (Pinnacle) Score?
A Beacon (Pinnacle) score is a three-digit credit score that differs according to the information in your credit report. Its name may differ among the different credit-rating agencies, even though all of them use the same mathematical algorithm (FICO).
In Canada, Equifax and TransUnion Canada happen to be the two credit-rating agencies. Now, these credit agencies sell your credit rating information to financial institutions, companies, and merchants that make decisions depending on your credit score.
Beacon (Pinnacle) score is ranked on a scale from 300 – 900, with the latter being a perfect score. Equifax on its end considers a score of 760 or higher as excellent. While a number between 700 and 759 is very good. A number that is below 560 is deemed weak.
This means that the higher your score. The better your odds that a financial institution will offer you what you want on favorable terms. Thus, while your credit score represents your solvency from a banking perspective, it can also help or hurt you when you rent an apartment or purchase a car or a house.
There are some factors that affect your Beacon score:
Your payment history has the greatest impact on your credit score. Amongst other things, it takes into account the payment dates for your invoices and the debts you have not reimbursed. Based on the items involved, some payments made on a due date will not always be flagged, however, late and missed payments are always recorded. Be it as it may, you should always strive to make your payments within the allotted time period, and even a few days in advance, if possible.
Use of available credit
Your use of available credit is the next most important factor. Credit rating agencies take into account what fraction of the total credit available to you through credit cards, lines of credit as well as other loans that you use. Understand that the higher the proportion of your available credit you use above a certain threshold, the greater a financial risk you are perceived as, even if you tend to pay your balances owed on time. Thus it is recommended that you keep this proportion of credit use below 35%.
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Duration of previous credit
The longer you keep an operating line of credit, the better your score. Conversely, a recently opened line of credit will have a lower score, thus you should think twice before you close out a credit card account or a line of credit, mostly if you do not pay an annual fee to maintain it.
Number of requests for credit
For each time you apply for credit, the information contained therein is entered into your credit report. A string of applications may signal that you are actively seeking funds or that you have poorly managed your assets. It is advised that you group your applications within a relatively condensed period of time.
Types of Credit
The various sources of credit at your fingertips it is taken into account. Thus, it is preferable to have quite a number of credit instruments instead of just one. Say, for example, having only a single credit card may result in a lower score. However, what matters most, is your ability to properly manage your credit, irrespective of the number of products you have.