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It pays to be a responsible credit user for many different reasons, especially when you’re living in a popular but expensive urban area in Ontario, such as Ottawa. In fact, having good credit is one of the keys to accessing favorable credit products and interest rates to go with them.
Since a bad credit score can have the totally opposite effect when it comes to your financial health, it also pays to improve your situation whenever and however you can. If credit improvement in Ottawa is your ultimate goal, be sure to keep reading.
What Elements Show Up On a Credit Report?
Your credit report is an important part of your status as a credit user. As soon as you start using credit products, your provider (also known as your lender) will begin sending regular information to Canada’s main credit bureaus; Equifax and TransUnion.
This may be a credit card, loan, or line of credit. No matter the product, it all shows up on your credit report, which is a detailed personal profile containing records of all your actions spanning over the last decade or so. Whenever you apply for new credit, a potential lender can request a copy of your report and use it to determine how responsible of a client you would be if approved.
If you wish, you can also request a copy of your own credit report so that you can monitor your credit health, as well as check it for errors, fraud, or identity theft (for more information about credit report errors, click here). Potential landlords, employers, and other outside parties may also be able to view your report to confirm that you are a good tenant, worker, and all around credit user.
The first bits of information that you’ll see on your credit report will be your personal details, such as your:
- Full Name
- Date of Birth
- Address/Postal Code
- Social Insurance Number (SIN #)
- Telephone Number(s)
- Driver’s License Information
- Passport Information
- Employment History
Credit Related Information
If all your personal data appears correct, your potential lender will move on to the elements within your credit history, such as your:
- Credit Accounts/Transactions
- Service Accounts (utilities, internet, etc.)
- Black Marks (NSFs, fraud, default, etc.)
- Delinquencies (consumer proposals, bankruptcies, etc.)
- Legal Judgements
- Credit Inquiries
- Fraud Alerts
- Accounts in Collections
Do you know what your credit utilization ratio should be? Click here to find out.
The Impact of a Healthy Credit Report
Simply put, a credit report with no errors and a solid history of credit usage is the best way to see positive results when you apply for a new credit product. After all, when you apply, lenders will use many of your financial elements, including your report, to determine the level of risk they would potentially be taking by approving you.
If there’s little to no sign that you’ll default on any of your products, lenders will generally be more willing to approve you for a large amount of credit, with a lower interest rate and more favorable payment plan. On top of that, handling your active credit products responsibly goes a long way when credit improvement in Ottawa is your end goal.
What Makes a Good and Bad Credit Score?
Another element that you should be aware of is your credit score which, for a small fee, you can view at the same time as you request your credit report. Your credit score is a three-digit number ranging from 300 to 900 and is a basic representation of your strength as a credit user, which is why lenders will also look at it when you apply (for more information about what your credit score range really means, check this out).
Since a good credit score is another way to earn approval for favorable credit products, it’s essential to learn about the different ranges it can fall within, as well as the habits and events that can lead to such ranges.
Good Credit Score (660 – 900)
If your score falls within the good range, it is generally because you’ve been displaying decent financial aptitude all around. Whether it’s because you pay your bills on time and in full, you avoid applying for too much new credit all at once, or you’ve experienced very few financial problems, the result is the same. Good credit leads to a low risk for your potential lender and will, therefore, result in better credit products with more affordable rates.
So, in order to see the best results when you apply and to save as much money in interest as you can over the life of your product, it’s important to stay within this range or improve your score to this point however you can before applying.
Interested in what the average credit score is by province? Click here to learn more.
Fair Credit Score (600 – 659)
When your score dips into the fair range, it is often because you’ve had some trouble paying your credit products as agreed or you’ve recently experienced other small-scale financial issues. Maybe you’ve been sticking to minimum credit card payments or have occasionally defaulted on a loan. Perhaps there was an error on your credit report that you disputed promptly with Equifax and/or TransUnion.
Despite those habits and events being easily resolved, the further your score drops, the less creditworthy you’ll become over time. Here, credit products will gradually be harder to get approved for, large amounts of credit will be further out of reach, and interest rates will start to climb.
Bad Credit Score (300 – 559)
Watch out, because defaulting multiple times on your credit products can lead you quickly down the path to a bad credit score, which is somewhere you don’t want to be. Every time you make a payment late, short, or miss it entirely, your credit score will drop by a few points, so it’s best if you can avoid this kind of negative habit, especially if it’s going to result in you filing a consumer proposal or declaring bankruptcy some day.
Although consumer proposals, bankruptcies, and other debt management procedures are some of the most financially damaging events that you can go through, a bad credit score can also be caused by situations that are out of your control. An identity thief committing fraud in your name, long uncorrected errors on your credit report, and other types of emergencies can all result in serious harm to your score.
Unfortunately, regardless of what caused your bad credit score, the damage that occurs will likely push any favorable credit products out of reach. This will be a particular obstacle if you apply with a prime lender, like a bank, where approval standards are sure to be strict. In that case, you may have no choice but to apply with a subprime lender, where standards are more lenient, but credit products are much smaller, more expensive, and less adjustable.
How Can Credit Improvement Be Achieved?
Having bad credit can make it very difficult to get approved for favorable credit products and can put you under a lot of unwanted financial strain. What’s worse, it can also be quite difficult to beat and eventually recover from.
However, whether you have bad credit or just need to increase your credit score a little bit, there are many different ways to word toward credit improvement in Ottawa. In the end, how much time and effort it takes depends on your current financial situation and level of commitment.
So, if you’re willing to try hard, there are some healthier habits you can implement, as well as some products and programs that will help you build credit over time, any of which can lead to a drastic improvement under the right circumstances.
Is being in the 800 credit score club really that important? Find out here.
Simple Credit Improvement Habits:
- Check your credit report at least once per year
- Dispute any errors, signs of fraud or identity theft that you discover
- Earn as much income as you can or find a new job entirely
- Track your spending with a proper budget
- Reduce any unnecessary expenses and store your savings in a TFSA
- Pay your debts on time and in the fullest amounts possible
- Avoid applying for too much new credit within a short time frame (hard inquiries in your credit report can also decrease your score)
More Effective Products & Programs:
- Apply for a secured credit card
- Enter a credit rehab savings program
- Attend credit counselling sessions
- Take out a debt consolidation loan
- Sign up for a debt consolidation program
Note: The products and programs above, while effective in many ways, come with their own positive and negative aspects, any of which can significantly change your financial situation. Always consult a financial advisor or credit counsellor before you attempt any credit building product or program.
Seeking Credit Improvement in Ottawa?
If that’s the case, you’ve come to the right source. Loans Canada is here and willing to help you find the credit improvement method that best suits your financial needs. Simply call us today or check out our website for more information. Remember, it’s always best to act right away when it comes to credit improvement.