We all know that our credit rating is important and that bad credit can have a significant impact on our daily lives. That said, do you know everything you should know about your credit rating? Do you know all the factors that can affect it? Finally, do you know what a “good” credit score is?
To answer these questions, we must first take the time to discuss how your credit rating can affect you deeply, to better understand what is at stake.
How can a low credit score affect me?
Your credit rating is used by countless individuals and organizations to assess your payment habits before you make a loan or credit increase, or simply to assess whether it is wise to trust you in a business environment. recruitment, insurance or even rental.
When applying for a job
A low credit rating could deter a potential employer. If an employer asks you for your consent to a credit check and it is less than positive, he may think it indicates that you are irresponsible. In this case, another candidate with a better credit rating could be with your dream job!
When applying for a loan
It is clear that your credit rating is an important factor when a lender determines whether to give you the loan you are requesting. That said, even if you succeed in obtaining a loan, a low credit rating could have a negative impact on the limit that you are offered as well as on the interest rate.
When renting a vehicle
While renting a vehicle is not the same as borrowing money, the lease often includes a request for consent to a credit check. Leasing companies want this audit for the same reason as a financial institution: they want to know what kind of risk you have before lending what belongs to them. A low credit rating can cause a refusal, even during a car rental!
When renting a home
The owner of a building or house may also ask you for a credit check. A bad rating could be used to indicate that you will not pay your rent when it is due; he may not take the risk.
Understand your credit rating
In Canada, a credit score can range from 300, everyone’s starting point, to 900, the highest rating possible. TransUnion, one of the credit bureaus used to determine this rating, explains that a rating of 650 represents the point where a person starts having a “good” rating. This means that a rating of 650 or more could help you get a loan without too much difficulty, and that a rating below this threshold will have the opposite effect.
Having a credit card is a good way to establish a credit rating, maintain it and even improve it, but only if it is used responsibly. If you do not exercise wisdom in the use of your credit card, its effect on your rating may be harmful.
Your rating represents only the moment when it is verified: that is, it is always changing, depending on your behavior regarding the credit tools at your disposal. Remember that the error is human and that it is possible for anyone to rebuild their credit, if they are ready to put the necessary effort into it. The most important factor is to always make your payments when they are due.
Do not delay too much on the exact number of your rating: it will vary depending on who asks for it and when this person performs the verification. The figure you will see on your report represents a targeted calculation for consumers, while the target calculation for a financial institution, as well as the importance it assigns to a number of different factors, will all affect how your rating is interpreted. As long as you find yourself more-or-less or want as to your rating, that’s what matters.
In any case, while your credit rating will always be an important factor when evaluating a loan application, please note that it is not the only factor that comes into consideration.
Your payment history
When we speak generally, yes a rating of 650 or more is a “good” rating and can qualify you for an increase in your existing credit or for a new personal loan. That said, even with a score well above 650, you could be denied a mortgage or a new credit card. A very important factor when applying for these types is your payment history.
Lenders want to know that you have not only a variety of credit types already granted on your behalf, but also that you follow their payment paths without fail. That is, it is not enough to have obtained credit approvals, your use of what has already been granted to you must be wise. A lender wants to see at least a year or two of healthy behavior regarding your debt payments. So, if you’re going to get a mortgage soon, get started right now to rebuild your credit.