.The credit ratings which are provided by the Bureau of Credit Information provide a summary of your spending and payment history. Your credit history helps lenders determine the level of risk you present when applying for a loan. A credit score is also an important factor in determining whether you get an auto or home loan. It would also influence whether you qualify for a credit card, financial aid, or a student loan. Credit rating can also determine the interest rate a consumer pays on their loan.
The better your credit score is the easier it will be to qualify for good terms on a mortgage and other loans. This in turn will allow you to save money by paying more on your monthly payments. It is also an extremely competitive market and with so many lenders all vying for your business, it is important to maximize the benefits that come with scoring highly.
What is a credit score?
A credit score or credit rating is an indication of the risk you pose to lenders. The highest possible score is 850 and the lowest is 300. It is based on a scoring system of 300 to 850, with higher scores indicating lower risk. This means that the higher your score, the more likely you will qualify for loans at more competitive interest rates.
Why do lenders need a credit rating?
A FICO credit score helps lenders determine how likely it is that you will pay to back your loan. Lenders have to be certain that they will get their money back before they make a loan to any individual or company, especially since they are responsible for any unpaid balances in case of default by the borrower. Some financial products do not keep credit checks as eligibility criteria such as auto title loans, and collateral loans.
Ten Steps You Can Follow To Improve Your Credit Score
There are many ways in which you can improve your credit score. Which include, paying all bills on time, reducing unnecessary debt. Only applying for a certain amount of credit that you can afford to repay. Moreover, you should be aware of any errors in your report. That should be rectified with the bureau before they affect the lending decision.
- Pay your bills on time – if you pay your bills on time, lenders will have a good picture of your financial situation. If you get into arrears (more than 60 days late) and then stay there, it can affect your credit rating
- Pay off any credit card debts – getting rid of these debts can improve the financial strength of the account. The more you have to pay back and the faster you repay them, the better it will look on your report. It is possible to accomplish this by obtaining a balance transfer credit card with 0% APR on payments until the balance is paid off.
- Apply for a credit product that you can afford to repay – if you only apply for the amount of credit that you can afford to repay the better. If every month you apply for additional credit and then pay the balance straight away then it will look better on your report.
- Reduce your levels of debt – taking steps to reduce debt is a good way to improve your financial strength, and in particular when it comes to credit card debts. This means paying off balances as soon as possible, especially if they are due in full every month. Look at ways of repaying debts such as transferring, but do not become complacent because many other creditors are looking at your financial information which may affect how lenders view you
- Check your credit reports – if you have paid bills on time, can only afford to repay what you’ve taken out, and are not overborrowing then you should check your credit report before applying for any products that require a credit report. If there are errors make sure they are amended. Any errors or omissions can affect your score
- Keep a record of your credit card purchases – if you notice a pattern of purchases then you could be tempted to take out more credit than you can afford, especially if you are concerned that a loan may be in the pipeline. This can affect your credit rating and can be hard not to do it again. Keep a record of all the credit card transactions so that you know what is happening
- Look at the credit cards that are paying interest – because many people put their monthly payment on their cards, then they don’t realize they have paid interest for free until later. Look at all your cards and see which ones are paying the interest for free or at reduced rates. Take steps to ensure that you pay these off as soon as you can.
- Limit the number of times you apply for credit – this goes back to the first point about applying for credit. If you only apply when you need it, then your credit rating will remain strong. If you become complacent and apply for more than is necessary. Then this will affect your score, with high levels of activity showing. That your credit card debt levels are growing all the time. You should ensure you can pay for the car or home you want with savings or another source of financing before applying.
- Don’t take out credit cards with high-interest rates – if you are in debt and struggling to repay a loan. Then it may be the case that you need to consolidate. Even if you have no intention of taking out any more credit or there is little likelihood of you doing so. Then a consolidation loan will lower your overall debt levels. Look at taking out a low rate card rather than one with a high rate of interest. To be sure that your money is working harder for you.
- Keep a record of when you were first approved for a credit card. If you’re thinking about getting a new one, look to see if your existing card has been paid off. Before or if it has had a low or rewarding balance. This will help to show that you have been able to handle your debt. That is an increase in usage is due to something other than financial health. It may be the case that your credit score has increased. Because you have been using it appropriately – which would suggest that it’s time for a new card!
Improving your credit score can help you in the future if you want to get a loan at low interest rates and favourable terms. But what if you need it now and have a bad credit score? You should take out a loan that will not affect your credit score even more. An auto title loan is one such option. You can use your fully paid vehicle as collateral and make the money you need. No need to have a good credit score or any job. Just use your fully owned vehicle to borrow cash. Some institutions such as Canada Car Cash won’t perform a hard credit check and even they have nothing to do with your financial history.
Use this financial product to solve your current financial problems and keep your focus on improving your credit score for future problems.
Is it Possible to Rebuild Credit?
For your credit score to change noticeably, you need to demonstrate good credit behaviour for at least 3-6 months. Negative information on your credit report cannot be changed quickly. Unless it is merely a minor blip, such as being late with a bill payment.
A specific timeline for credit repair is impossible; In general, though, the fewer negative items on your report – past due to bills, maxed-out credit cards, constant credit applications, bankruptcy, etc. – the easier it is to improve your credit rating and ultimately your credit score.
Bad credit scores require more time to repair than good credit scores do. Your credit score is negatively affected by errors, which can hinder your loan application. Loans with bad credit are offered by some lenders. However, the higher interest rates when borrowing these loans will cost hundreds or thousands of dollars. Poor credit can also make it difficult to rent an apartment, set up utilities, or even get a job!
The amount of points you lose for being late with just one payment is not nearly as significant as if you continue to default for several months. You will receive a higher score if you perform well in the second situation compared to the first one.
Negative information that detracts from your credit score may negatively impact your score within these timeframes.
Delinquent accounts appear on your credit report for seven years.
You are reported for 7 years after car repossession.
For ten years, the bankruptcy will appear on your credit report. Seven years remain on Chapter 13.
For two years, inquiries about credit applications remain on your report.
Your report may include public records such as liens seven years ago.