What are Beacon score, FICO score, and Empirica Score Points?

Do You Know the Score When It Comes to Your Credit?

Get a grip on your credit position with your credit report & credit score! With personalized analysis and tips, you’ll know what factors are influencing your credit rating and what you can do to improve it!

The Beacon / FICO / Empirica are credit scoring systems used by both major credit bureaus in Canada:

• Empirica Score = TransUnion
• Beacon Score or FICO = Equifax

These scores can be different because each bureau may have different data from different creditors, but the scores all measure the same and should be close.

Scoring predicts the likelihood that an existing account or potential customer will become a serious credit risk. Each score measures the borrower’s credit report. It is important to note that it is not a measure of a borrower’s income, assets, or bank account – it is based solely on the data within the credit file.

Average credit score

Beacon Fico scores range from 300 to 900 (some say 850)
The average Canadian has a Beacon Fico score of 720
Canadian first line lenders want a Beacon score of at least 600 (some prefer 640 and higher)
Alternative lenders want a Beacon Fico score of 540 or higher

(As a rule, the lower the score, the higher the equity or down payment.)

Credit Beacon FICO Empirica scores do not use race, colour, religion national origin, sex, marital status, or age as predictive characteristics. Occupation and length of time in present house are not used. Any information that is not present in the credit file is not used in creating a Credit Score.

The Top Killers of Beacon scores are: – Bankruptcies, Judgments, Collections, over 30 days late on payments and the #1 silent killer, of people with no late payments, is….Drum Roll PLEASE….over 80% loaned against High Credit Limit. Who knew?

Credit scores are different because each Bureau may have different data from different creditors, but the scores all measure the same and should be close. Scoring is not a measure of a borrower’s income, assets, or bank account – it is based solely on the data within the credit file. Some banks don’t even report unless you screw up.

Credit Beacon Empirica Fico scores are calculated like this:

All Beacon, Fico, Empirica, credit, credit rating scores are based on, all the good and bad credit related data in the credit report – not just bad credit.  Compiling a credit score includes but is not limited to:-

Payment History:

• Public record and collection items
• Severity, recentness and frequency of delinquencies noted in trade
• line section

Outstanding debt:

• Number of balances recently reported
• Average balance across all trades  …..the 80% thing…..
• Relationship between total balances and total credit limits ..again..
• on revolving trade lines

Credit Report History:

• Age of oldest trade line       ….3 items over 12 months old needed…
• Inquiries and new credit account openings:
• Number of inquiries and new account openings in the last year
• Amount of time since most recent inquiry

Types of credit in use:

• Number of trade lines reported for each type:
• Bankcard
• Travel and Entertainment cards
• Department store cards
• Personal Finance company references … these can hurt scores

Here’s an excerpt from a newspaper article on how credit scores are figured

1. Timeliness of your bill payments (35 %): Includes late payments, bankruptcies and delinquencies. A 30 days late payment, a collection, a judgment can decrease your score 15-40 points for each entry even if it has been paid and shows paid in full. Catch these before 1 month expires and you have a chance of total removal or non-placement.
2. Your outstanding credit (30 %): Includes the amount of debt you have accumulated on your credit cards as well as how much you owe on instalment loans (compared to the original amount of the loans). I’ve seen credit reports that show no late payments and the credit score will be a low 600. It’s because there are some accounts that show you owe 80% or more against your high credit limit. My work mate found his score at 621 with no late payments. He moved around some money, reduced his debt to high credit ratio and his score jumped to 706 in less than 3 weeks.
3. The length of time your credit has been active (15 %): Takes into account how long you have had credit accounts and how often you use them. Most banks look for “3 rated trades”, or 3 accounts that have been open for at least 12 months. I’ve also seen people who have many credit items, but they haven’t borrowed in 2 years and oops now they have no beacon score at all.
4. The types of credit you have (10 %): Includes credit cards and loans such as instalment loans, mortgages and car loans. Small finance company loans and large numbers of open credit cards can sink a beacon credit score as much as 20-40 points if it looks like a serial get a loan person is on the loose.
5. Any acquisition of new credit (10 %): Assesses how much credit you have acquired over the length of your credit history. Opening a number of new credit accounts over a short period of time may be detrimental to your score.

(According to Equifax, they do not use any financial inquiries done in the last 30 days when calculating a Beacon score.  After 30 days, they will group all financial related inquiries done within 14 days and treat that as only one inquiry.)

Generally, people with high FICO scores consistently pay their bills on time, keep low or no credit card balances and only apply for new credit accounts as necessary. If your score is not as high as you would like it to be, be sure to review the four “score reason codes” that accompany your score. Common score reasons include serious and/or frequent missed payments; multiple accounts with high balances; and bankruptcies, liens, foreclosures or judgments….(I found this to be hog wash as even good scores says negative stuff at the top.)

Those of you who has credit problems or low Credit Scores, and if you live outside of major urban areas, chance are not good that you will qualify for a mortgage.  Mortgage insurers won’t even consider you for refinancing if it is deemed to be default management.

If you need help with debt counselling, please go to the Resources at the top of this page.  If you want to find out what default management is, go get your copy of my free eBook: “The Top 10 Things You Must Know Before You Apply For A Mortgage Loan in Canada”.

Below is anther interesting video form The Mortgage Teacher on how to increase your credit score. Now I cannot vouch for all the strategies he is telling you, but I agree with most of what he is saying. Take a look.