Loans Canada Launches Free Credit Score Portal And Is Recognized As One Of Canada’s Top Growing Companies
Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
Most Canadians have applied for a credit card, car loan or a mortgage. However, there are some Canadians who are more risk-averse and haven’t used any credit. Depending on what your credit is like, your ability to access affordable credit will vary. However, have you ever wondered if having no credit is better than having bad credit?
In Canada, credit scores range from 300 to 900. In general, a good credit score is considered to be anywhere from 660 to 724. With a score in this range — and anything above it — securing a loan or credit product is more feasible and affordable.
Unfortunately, scores that fall below this range make it more difficult for Canadians to get approved for loans, and may even make it tough to secure a lease, a cell phone contract, and even a job.
More specifically, a bad credit score usually falls under 559. Lenders, banks, landlords, and even employers may consider you financially unstable if your score is at this level or lower.
If you have bad credit, you’ll either need to work with an alternative lender to get approved for a loan or take some time to improve your credit to make borrowing more accessible.
There are numerous factors that can negatively affect your credit scores in Canada. Here are a few reasons you may have a bad credit score.
One of the most important factors used in calculating your credit scores is your payment history. In fact, this component accounts for around 35% depending on the credit scoring model used. As such, if you have a history of late or missed payments, it could be negatively impacting your credit scores. Understandably, lenders won’t want to deal with anyone who is known for missing bill payments.
The amount of credit you use relative to your credit limit, known as your ‘debt-to-credit ratio‘, is another important factor that often makes up your credit scores. If you spend high amounts compared to the credit you have available, it could negatively impact your credit.
The higher the ratio, the worse it usually is for your credit scores. Ideally, your credit utilization ratio should be no more than 30%.
Filling out too many loan or credit account applications within a short period of time can be bad for your credit scores. While a couple of hard inquiries may not cause much damage, multiple hard inquiries might. Moreover, too many credit inquiries suggest you may be financially struggling. Lenders want to be secure knowing that you have enough income to cover your bill payments, but having too many credit inquiries means you may be taking on more loans which may stretch your income too thin.
If you’ve already defaulted on a loan, your credit may suffer. Even if you’ve missed a payment here and there, you can still make good on your loan obligations by making up for these payments shortly after.
But if you fail to make your payments after 90 days, your account will be moved to default status. This can severely negatively affect your credit scores. Moreover, you’ll also likely have a collection agency after you to collect the funds you still owe.
If you have ‘bad credit’, that means you already had established some credit. But ‘no credit’ means you have no credit history at all. You’ve never applied for a loan, credit card, or any other financing product before. In this case, the major credit bureaus have nothing to go on to assign a credit score to you.
Like bad credit, no credit makes you somewhat risky in the eyes of lenders. With no credit score to assess your financial health, lenders have nothing to base their decision on whether to extend you credit or not. No credit history means your creditworthiness is unknown, which can make lenders uneasy when it comes to approving you for a loan. As such, until you establish some credit, you may have difficulty securing a loan and other credit products.
There are a few reasons why you may have no credit, including the following:
The most obvious reason for having no credit is your lack of credit usage. A zero credit score can be a result of no or very little credit history. In order for the credit bureaus to generate a credit score, they require enough information in your credit report to do so. This is common for young adults and students who are just starting out in their financial life.
No credit history is also a common trait for newcomers to Canada. While a newcomer may have had some sort of financial profile back home, they may not have had the chance to build it once again when they initially relocate to Canada.
If you have access to a credit product, like a credit card, but have not used it in a while, it may appear to lenders that you have no credit. Credit card issuers and lenders report payment history to credit bureaus, which is how your credit history is established. Generally, credit information lasts for 2 to 6 years depending on the credit activity, after that it disappears from your report. So if you are not using your available credit, that too can cause you to have no credit history.
Whether you have bad credit or no credit, you’ll have difficulty securing different credit products in the future. That said, having bad credit is generally considered worse than having no credit at all as far as lenders are concerned.
Lenders may be more willing to give borrowers with no credit a chance over those with bad credit because they haven’t been irresponsible with credit. A person with bad credit suggests they’ve mishandled their debt which may include late payments, loan defaults, high credit utilization and other poor credit actions.
Building a positive credit history is imperative in order to qualify for a loan or mortgage in the future, especially if you want a favourable interest rate. If you have zero credit history or very short credit history. Here are a few simple steps to help you improve your credit:
If you currently have bad credit, here are 5 steps to improve it:
The longer you’ve established a credit history, the better your overall credit score. Thus, starting early and working your way up slowly can help you build your credit. While it may take considerable time and effort to recover your bad credit, consistent responsible credit usage can help your credit. Once you’ve established good credit, any future loans you may will be easier to access, that too with affordable rates.
Rating of 5/5 based on 1 vote.
Earn an average 5%¹ cash back at thousands of partners and at least 0.5%² cashback guaranteed.
Build credit while spending money with the Refresh Financial VISA card.
All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.
When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.
Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.