Markham, as one of Ontario’s most populated cities, is home to many credit users like yourself. Although living in such a vast urban area can be beneficial, it also means that you likely have a variety of different costs to consider. Don’t worry, because having good credit can help you save money on many of those costs.
Then again, if you don’t have stellar credit, you could end up paying more for things than you really need to, so it’s very important to improve the health of your credit report and credit score however you can. Keep reading if you’re interested in credit improvement in Markham.
The Information On Your Credit Report
It’s essential to understand what happens when you start using credit in the first place. Once you’re approved for your first credit product (typically a credit card), your lender will inform Canada’s two main credit bureaus about it.
These bureaus, known as Equifax and TransUnion, will then each build a credit report in your name, which contains records of all your credit-related actions over the past decade or so. Although both versions of your report will differ slightly, the information contained within is relatively the same.
To learn how to read your credit report, check out this article.
If you were to request a copy of your credit report, which you can do for free once per year from either bureau (extra copies cost a small fee), the first thing you’re likely to see is a list of your personal details, such as your:
- Full name
- Date of birth
- Social insurance number
- Mailing address
- Telephone number
- Citizenship status
- Driver’s license data
As soon as you have your reports in-hand (make sure to check both versions), it’s a smart idea to review all these details, as any informational errors can harm your creditworthiness significantly (for more information about credit report errors, click here). For instance, a simple spelling mistake in your name or address could result in the wrong payment information being displayed, which would damage your credit score.
If you do discover an error within your report, don’t panic. All you have to do is contact the bureau in question and request the proper paperwork to dispute it (usually done online or over the phone). If the error turns out to be factual, the bureau will have it corrected and the situation will gradually reverse itself.
Once your personal information is in order, you can move on to the details concerning your currently or recently active credit products. As a credit user, there are four account types that you can apply for and use, each of which is categorized by a different letter.
- R – products that have revolving credit limits (e.g. credit cards)
- I – installment-based products with fixed credit amounts (e.g. personal loans)
- O – open status accounts with specific credit limits per payment term (e.g. cell phone plans)
- M – mortgages on properties you’re actively financing or have recently financed
As mentioned, when you begin using any of these accounts, your lender will send the activity to Equifax and TransUnion, who will update your credit report regularly. Most of that credit-related information will then remain in your credit history for several years.
For example, credit card transactions will normally stay on your report for 6 years with Equifax, while TransUnion will keep them there for 7 years in certain provinces.
Other credit-related information that you can see in your report will include:
- Credit ratings for any active accounts
- Credit inquiries performed by lenders when you apply for new credit
- Service account data (cell phone, internet, utilities, etc.)
- Liens/secured accounts
- Black marks, non-sufficient funds, fraud alerts, etc.
- Various debt management procedures (debt settlement, debt consolidation, etc.)
- Various legal judgements (lawsuits, fines, etc.)
- Accounts currently or recently in collections
- Consumer proposals and bankruptcies
Why all Canadians should be monitoring their credit, click here.
Canadian Credit Score Ranges
When monitoring the health of your credit and working toward credit improvement in Markam, it’s equally important for you to frequently check your credit score, which you can request for a small fee alongside your credit report or view for free through some online sources.
Essentially, your credit score is a three-digit number ranging from 300 to 900. While your credit report is a more detailed summary of your strength a credit user, your score is a more basic representation of it.
Though your score will be somewhat low when you start using credit, it will fluctuate according to your positive and negative activity from that point on. Check out the credit score ranges below for a better idea of where you stand as a credit user.
Good Credit Range (660 – 900)
If you continually pay your credit accounts on time and in the fullest amounts possible, your score will gradually rise, putting you in good credit health. Afterward, when you apply for new credit products, lenders can examine your report, see this positive activity and will deem you as a low risk for borrowing.
As a result, you’ll have access to more credit, more affordable interest rates, and better negotiation power for your upcoming payment plan.
Fair Credit Range (560 – 659)
If you occasionally pay your bills late or miss them completely, then your score will decrease, steadily moving you into the fair range. This effect is particularly apparent it when comes to revolving products, were using up too much of your available credit limit and only making minimum payments will also lead to a decrease in score.
As long as you don’t make these negative transactions habitual, it won’t be too hard to bring your score back up to the good range. However, with every defaulted payment, prospective lenders will consider you less and less creditworthy. As a result, you’ll have a somewhat harder time getting approved for large credit amounts, reasonable rates, and favorable payment plans.
Bad Credit Range (300-559)
If you continually display negative payment activity, your score will eventually drop until it’s within the bad range. Your score will decrease even faster if you get involved with some kind of financial delinquency due to your unpaid debts, such as a consumer proposal or a bankruptcy.
Unfortunately, it is here where prime lenders (banks in particular) will simply consider you too risky for approval. In that case, your only choice may be to apply with a subprime lender or one that deals specifically with applicants who have bad credit.
The good news is that subprime products are often easier to get approved for and any positive payment activity will slowly increase your score. That said since lenders are taking extra risk by approving a client with a greater chance of defaulting, those products will be limited, smaller, and more expensive. Lenders will also be less inclined to adjust your payment plans.
Since a bad credit score can lead to so much unnecessary turmoil when applying for and using credit products, it’s once again essential to improve your situation whenever and however you can. In fact, checking your credit score regularly is one of the best ways of achieving credit improvement in Markham.
How to Implement Better Financial Habits
Before you apply for any credit product, always keep in mind that your negative habits can lead to a significant drop in credit score and can spell disaster for your finances down the line. While defaulted payments and delinquency area damaging enough, there are a number of other negative behaviors that can lead to a bad credit score.
For instance, applying too many times for new credit within the same year is not a great idea because it will cause many lenders to check your credit report. Every time a lender looks at your report, a hard inquiry gets added to it. Each hard inquiry will result in a slight decrease in your score and will remain in your credit history for 3 – 6 years (depending on the bureau).
Thankfully, if you or a non-credit entity (landlord, employer, etc.) would like to check your report for whatever reason, it will only lead to a soft inquiry and will have no effect on your score.
Practice Positive Habits
If you’re on your way or have recently fallen into the bad credit range, there’s no need to panic, because your situation is reversible if you’re willing to work hard. However, the longer you let this situation drag on, the worse your credit will get, so it’s best to act quickly and start implementing positive financial habits.
Here are a few simple credit improvement techniques that you can try out:
- Create a proper budget and reduce all non-essential expenses from your life
- Check your credit report at least once yearly for errors, fraud and identity theft
- Maintain a steady source of employment/income
- Regularly deposit a portion of that income into an emergency savings account
- Follow your payment plans properly and avoid defaulting at all costs
- Use your active credit products responsibly
- Avoid predatory organizations that claim they can “fix” your credit for a fee (only you can improve your credit!)
- If using a revolving product, make more than your minimum payments and/or more than one payment per month
What does it mean to have of credit score of 780? Find out here.
If your credit is extremely bad and requires a more effective solution, there are also several credit building products and programs you can access in Markham, such as:
- Secured credit cards
- Guarantor/cosigned loans
- Credit rehab savings programs
- Credit counselling sessions
If you have a ton of unpaid debt and are being subject to collection penalties because of it, you may want to look into some of the following debt management strategies:
- Debt consolidation program
- Debt consolidation loan
- Debt settlement
- Consumer proposal
Although these debt management procedures can also have a negative impact on your credit and finances, they can, at the very least, alleviate the burden of your debts so that you’ll have an easier time improving your credit report/score.
How Loans Canada Can Help You
Bad credit can be a huge problem for your financial health, so it’s best to improve it in whatever way you can. Loans Canada can help you achieve credit improvement in Markham. Check out our website to be connected with the right solution today.