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📅 Last Updated: October 4, 2021 ✏️ Written By Bryan Daly 🕵️ Fact-Checked by Caitlin Wood
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As a credit user in Lethbridge, you’ll come across many different kinds of financial tools, each of which is accompanied by a wide range of benefits. There are mortgages to buy houses, loans to cover larger items, and credit cards for your everyday necessities. However, those products can get more expensive and harder to obtain when you have bad credit.
That said, there are credit products in Lethbridge that you can get approved for and one of them is the bad credit loan. Keep reading if you’d like to know how one of these tools can help your financial situation in Lethbridge.
Did you know that bad credit can affect your daily life? Learn more here.
Defining Bad Credit
In Canada, building good credit is all about the products that you use and the lending sources you get them from. The more products you use in a responsible manner, the better your credit report will look and the higher your credit score will be. Those two elements are then used by lenders as a representation of your financial strength when you apply for a new credit product.
Your Credit Report
When you first start using credit, your lenders will begin reporting all your product and payment activity to Canada’s two major credit bureaus; Equifax and TransUnion. Each bureau will then build you a personalized document known as a credit report, which contains records of all your credit-related transactions over the past decade or so.
Your Credit Score
They will also assign you a three-digit credit score ranging from 300 – 900. That score is then used as a more basic depiction of your creditworthiness. The closer your score is to 900, the healthier your credit is overall and the more likely you’ll be to get approved for larger amounts of credit at more reasonable interest rates.
Wondering why you have more than one credit score? Find out here.
Bad Credit
However, if you don’t manage your credit products properly, your credit score can decrease rapidly, putting you within the bad credit range of 300 – 600. Although every lender has varying standards for the clients they can and can’t approve, the general consensus is that the lower your credit score drops, the harder it will be to obtain favourable products with affordable rates.
Unfortunately, every payment you come up short on, pay late, or miss entirely can gradually make your credit worse. That said, the real problem is that there are many different situations that can result in defaulted payments and bad credit, many of which are avoidable habits and others that are totally unexpected.
Examples:
- Overspending on unnecessary items and maxing out your credit cards
- Trying to keep track of too many products, rates, payments, and purchases
- Reduced hours at work or total loss of employment
- Car accidents, house floods, and other financial emergencies
- Uncorrected errors on your credit report
- Fraud and identity theft
Read this to learn how you can get a free yearly copy of your credit report.
Breaking Down Your Credit Score
To get a better idea of how you can improve bad credit or avoid it altogether, it helps to break down the 5 factors that credit bureaus use to calculate your credit score. While any of these factors can cause your score to fluctuate, some are certainly more influential than others, so make sure to study them before you apply for any new credit products.
Payment History (35%)
For lenders, the most important part of their decision to approve or reject your application will mainly hinge on your ability to make payments on time and in full. The same goes for your credit score, where your payment history weighs in at the largest percentage. Remember, the more responsible payments you make, the higher your score will climb.
Debt Owed (30%)
Another essential part of being a healthy credit user is having as little unpaid debt show up on your credit report as possible. Since the money you owe is such a significant factor, it’s best if you complete your payments as designated for any fixed credit products like loans. For revolving products like credit cards, try to stay below 30 – 35% of your available credit limit.
Credit Account History (15%)
The age of the accounts in your credit history is also important. In this case, the older and more responsibly used an account is, the more positive the effect on your credit score will be. At the very least, you should try not to open and close multiple new accounts within the same few months.
New Credit Inquiries (10%)
Whenever you apply for new credit, potential lenders are permitted to check your credit, which adds a hard inquiry to your report. Every hard inquiry decreases your credit score by several points and remains in your credit history for around one year. As such, it’s once again better to avoid applying for too many new products all at once, especially if you already have bad credit and are getting denied each time.
Credit Types (10%)
If you do have bad credit or less-than-perfect financial health, it’s not a great idea to take on more credit products than you can comfortably manage and afford. That said, if you can handle two or more products responsibly, adding diversity to your credit account types is a good way of building and improving your credit.
What are bad credit lenders looking for when they approve applicants? Find out here.
Loans For Bad Credit Borrowers in Lethbridge
The more unhealthy your credit is, the harder it will be to obtain new and reasonably priced credit products from prime lenders like banks, where approval standards can be quite tough to surpass. Don’t worry, there are plenty of subprime lenders in Lethbridge that deal specifically with bad credit borrowers.
Although a loan from a private, alternative or bad credit lender in Lethbridge is likely to be smaller, more expensive, and come with less adjustable payment plans, any legitimate product that’s handled well can improve your credit. Once your credit is healthy again, you’ll be free to pay off any subprime loans and apply for new prime ones.
Examples of bad credit loans:
- No Credit-Check Loans – There are many lenders across Alberta that do not perform a credit check when approving you. Just be aware that these loans are likely to have much higher rates, as would be the case with a payday loan.
- Secured Loans – Offering a lender one of your assets as collateral can help you access a larger loan with a lower rate. Be careful here, because if you default on too many payments, your lender will have the right to sell said asset to recuperate their loss.
- Cosigned/Guarantor Loans – If your own credit isn’t good enough, a stronger borrower can cosign your application, thereby becoming your loan guarantor. Once again, you must be responsible with your loan, as this guarantor will be agreeing to take over your payments if you can’t afford them.
Click here to know what types of lenders will accept your cosigner.
Watch Out For Loan Scams in Lethbridge
Since bad credit can make it difficult to access favorable loan products, it’s tempting to apply with the first lender that agrees to approve your application without hassle. Not so fast! Unfortunately, there are many predatory lenders and scam artists in Lethbridge and Canada, in general, who are looking to swindle you.
Predatory lenders will use your desperation as an excuse to charge you unaffordable rates for sub-par credit products, while scam artists will simply steal your money and identity so they can commit fraud. Either way, your financial profile can end up terribly damaged if you don’t research your supposed lending sources properly.
Don’t trust any “lender” that:
- Charges rates that are higher than Alberta’s limit ($15 per $100 borrowed)
- Doesn’t have good credentials, a real address, or decent customer reviews
- Refuses to show you a valid business license or the total cost of their loans
- Avoids your questions or uses aggressive sales tactics.
- Promises a 100% approval rate for all applications
- Demands your credit card number or “loan insurance” before they approve and deposit your loan money
For more information concerning loan scams, be sure to check this out.
How to Improve Your Credit in Lethbridge
Remember, the less of a defaulting risk you can make yourself, the better the results will be whenever you apply for a new loan or other credit product in Lethbridge. So, if you have the determination, it’s always a good idea to improve your credit as much as possible before you apply, especially if it’s for a more expensive bad credit loan.
If that’s your goal, there are several other tactics, products, and programs you can try out, including but not limited to:
- Making good payments using a secured credit card
- Going to credit counselling sessions
- Entering a debt consolidation program
- Entering a credit rehab savings program
Look at this if you’re interested in attending credit counselling.
Visit Loans Canada Today!
If you choose our network, we can quickly connect you with the best sources of bad credit loans in Lethbridge and other major cities in Alberta. Simply contact us today for more information or apply below. We’re here to help you!
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