Why your credit score matters in Canada
Your credit score is one of the most important things to be aware of in your financial life. Yet, studies state that more than half of the Canadians are completely unaware of where their credit stands.
Your credit score has a lot of power when you’re thinking of borrowing money for a major purchase. This can include a new house, or that fancy car you’ve always wanted. A good credit score can mean the difference between your loan being approved or denied. Each negative event, such as a call from a collection agency over a missed bill payment, is reported.
What is considered as a Good Credit Score?
A credit score contains a three-digit number that is calculated evaluating the information found in your credit report. It is seen by lenders to determine your financial situation, as well as examine your risk. Two of Canada’s largest credit bureaus are Equifax and TransUnion, who use scores that range from 300 to 900. A good score is usually 670 and higher. If your credit score is more than 750, your rating is considered excellent. Bear in mind, the higher your credit score is, the less risk you are for lenders.
What Impacts Your Credit Score?
You should know that even if your current score is low, your situation is never always the same. You do not have to live a life of poor credit forever if you commit to stay on top of your finances. Here are 4 determinants that go into generating a credit score and ways to plummet your risk of building bad credit:
- The number of times you apply for credit. In other words, reduce the number of credit applications you make. How often are you signing up for loans? If you’re applying for too many credit cards or loans within a 12-month period, this can negatively affect your scores.
- Credit limit. Be diligent in staying within your credit limit. You should aim to keep your credit utilization below 35 per cent of your available credit.
- Payment history. How often do you pay your bills? Neglecting to pay can be a huge red flag for lenders. Let’s not forget the significance of paying your bills in full, as well. If you’re really stuck, make it a thing to pay the minimum payment at the very least.
- Length of credit history. Your credit score takes into account how long you’ve been using credit. Start establishing a positive credit history by taking out a credit card at a young age, and paying your balance in full and on time. Often, having no credit is worse than bad credit, so starting out early on is wise.
How to repair your credit score
You may be unwilling to review your credit report because you think doing so will negatively impact your credit score. It’s crucial to know that soft hits, such as requesting a free copy of your credit report, do not impact your credit score. Equifax and Transunion both offer easy credit reports. All you have to do is go online and enter your personal information. To receive a printable report both services ask a small fee but if you’re willing to wait, you can receive a free report through the mail.
Credit building is a gradual process that involves time and effort but you can start your journey today. Canada Auto Experts can help you establish a good credit score with a car loan regardless of your credit. Call 1-855-550-5565 to talk to a credit specialist today!