You may understand that you have a credit score, but do you know why your rating is what it is? Also, why is it so important to earn and maintain a higher credit score?
Understanding What Determines Your Credit Score
Ranging from 300-900, your credit score is calculated from information contained in your credit reports (from Equifax and TransUnion). For your rating to be considered "very good" by most lenders, it should be at least 750. 14% of Canadians have a "very good" credit score. 57% of consumers in Canada have a score of 760+, which puts them in the "excellent" category.
Ratings may also be "good," "fair," and "poor," and it is good to know which factors cause scores to vary.
Basically, your credit score acts as a grading system for how well you have managed credit that has been extended to you. If you have paid all of your bills on time and in full, your score will send a message to future lenders that you are capable of responsible borrowing. However, if your credit score is lower, this indicates to potential creditors that you have been delinquent with obligations and that you may be a lending risk.
The Benefits of a Good Credit Score
In the world of finance, your credit rating represents your reputation as a borrower. Your higher score signals to creditors that you are not a lending risk, and there are definite perks associated with your status.
Please remember that while your credit score is an important factor that lenders consider when they make credit decisions, it is not the only determining item. Each lender sets their own policies regarding risk and may examine other elements, such as your income, when deciding whether or not you qualify for a particular line of credit.
Recovering from a Low Credit Score
If your credit has been damaged by bankruptcy, repossession, late payments or any other event, you may be worried about getting loan approval for your next big purchase. Say, for example, you need a car badly and immediately, and you cannot afford to wait until your credit improves to buy one. If this describes your situation, Canada Auto Loan can help.
We will connect you with a dealer in your area who is qualified to work with your credit rating. And after you have purchased your vehicle, your credit score will gradually increase with every timely payment you make. Get behind the wheel and on the road to good credit by filling out our simple, obligation free and 100% secure online application.