The truth is, bad credit can be a tough mountain to climb. However, if you’re a New Brunswick resident, there are plenty of financial tools at your disposal, many of which help you build good credit or improve yours once it’s been damaged. If you’re reading this, it might mean that you are suffering from bad credit. It may also be because you simply want more information about what bad credit is, how it affects your daily life in New Brunswick, and how you can fix it when it occurs to you. Don’t worry, you’ve come to the right place.
The Cause and Effect of Bad Credit in New Brunswick
The more actions you make as a credit user, the more your credit profile will fluctuate. While everyone’s financial situation is different, there are few things that are certain when it comes to the way you use your credit accounts (credit cards, loans, etc.):
For the average New Brunswick consumer, bad credit scores can be caused by:
- Missing, late and short payments – Otherwise known as “defaulting”, not honouring your loan agreement in any way can lead to damaged credit, particularly when you make it a habit. Here’s how to rebuild your credit following a late payment.
- Uncorrected errors on your credit report – Every registered credit user in New Brunswick has a credit report containing all their credit-related information over a specific number of years. It also contains parts of your personal and financial information. Unfortunately, if any of the information in your report is incorrect, it can cause serious harm to your credit, especially if it goes unnoticed for a long time. Here are the Top 5 Errors found on Canadian credit reports.
- Financial delinquencies – Serious debt problems can lead to New Brunswick consumers having to apply for debt management programs, consumer proposals, bankruptcies, etc. A record of these (and other credit activities) remains on your credit report for a predetermined number of years. During that time, your credit score will be affected negatively. To find out how long that effect can last, click here.
Ways a New Brunswick consumer can build/improve credit:
- Paying your credit accounts responsibly (on schedule and in the agreed amounts) – This, in turn, causes your credit score and rating to rise, eventually improving the look of your credit report and credit history.
- Paying at least the minimum monthly balance (more if possible) – For revolving credit products (credit cards, lines of credit, etc.) that come with a minimum monthly payment option, at least making those minimum payments will save you from late penalties and credit damage. However, you’ll be charged interest for any unpaid balances, which can only cause more debt. Watch out for the minimum payment trap.
- Keeping your credit utilization ratio low. Your revolving credit products have a credit limit that you must stick to. Staying as far below this limit as you can is important, as your credit score will drop with the more credit you use up. It’s recommended that you keep your ratio at 35% or lower for the best results. To calculate your ratio, take your current balance, divide it by your credit limit, then multiply it by 100 (ex: $1,000/$5,000 x 100 = 20%).
- Correcting errors on your credit report. You can request a free copy of your report once per year, check it for errors, then dispute them through Canada’s two main credit reporting agencies (Equifax and TransUnion). If the error is justifiable, your credit score will gradually improve after it’s been corrected.
- Keeping a lengthy history of diverse credit usage. Obviously, the longer your history of responsible credit use through a wide variety of credit products, the better it is for your creditworthiness. Read this to discover how the length of your credit history affects your credit score.
Bad credit eventually leads to the following for New Brunswick consumers:
- Your credit profile looking bad, making you a risky borrower in the eyes of conventional lenders in New Brunswick.
- Since your credit status is bad, those lenders will either deny your application or give you a higher interest rate than a borrower with a good score.
- Denied applications show up on your credit report. Other lenders see this when performing credit inquiries and also realize you’re a risky borrower, which leads to similar consequences.
- When you are having trouble getting approved, you might start applying all over town. Every hard inquiry performed drops your credit score by a few points and makes you look even riskier.
- If approved, your higher interest rate will make the product more expensive, possibly putting you in even worse debt and, ultimately, a worse credit situation. Want to know if you can beat your lender’s interest rate? Check this out.
How does bad credit affect your daily life? Click here.
Loan and Credit Products for Bad Credit Borrowers in New Brunswick
In New Brunswick and the rest of Canada, credit scores range from 300-900. The closer your credit score is to 900, the more creditworthy you’ll become. Generally speaking, a score of 650 or more is recommended for when the best chances of approval and a lower, cheaper interest rate.
If your credit is within the bad range (300-560) you’ll have a harder time getting approved at your bank or other conventional lenders in New Brunswick. However, there are still other lenders (alternative and online) who specialize in bad credit cases. While your interest rate will be higher and your payment terms a bit stricter, you’ll still gain access to:
- Loans with no credit check involved – While almost all conventional lenders use your credit health in some way during their approval procedure, many alternative lenders do not. Instead, they’ll consider elements such as your income, banking information, etc. Read about these lenders here.
- Secured loans – If you have assets, such as your home, car or other valuable property to offer up as collateral. This will earn you a higher chance of approval and a slightly lower interest rate.
- Secured credit cards – Typically reserved for borrowers who don’t qualify for regular unsecured cards, secured cards require a deposit upfront equal to the desired credit limit. Great credit improvement tools, once you do qualify for a regular card, you can pay your remaining balance and cancel your secured card. Your deposit will then be returned.
- Installment loans – These loans are meant to be paid back over time through installment-based payments with interest. Conventional, alternative and bad credit lenders offer some form of installment loan, the approval and interest rates for which usually depend on your financial and credit health. If you’d like to improve your chances of approval and a lower rate, finding a trustworthy co-signer can help. To discover installment loans in New Brunswick, click here.
Watching Out For Scammers in New Brunswick
In the world of online activity and bad credit, it’s unfortunate that many scam artists are beginning to use both of those ideas to their advantage. This is why it’s essential to do proper research when you’re searching for an alternative/bad credit lender online.
Here are some warning signs you can look out for:
- They ask for an advanced deposit. One of the easiest ways to spot a scammer is when they ask for “loan insurance”. It is illegal in New Brunswick and the rest of Canada for a lender to demand payment before your loan is approved.
- They won’t tell you exactly how much your loan will cost. While some lenders don’t check your credit, all legitimate lenders should tell you exactly how much your loan will cost you by the end of your payment term. That should include all interest rates and fees. If the contract is unclear about that or the salesperson is avoiding your questions, it’s best not to trust the source.
- Their company doesn’t have a solid reputation. During your research, make sure to check customer reviews and look up any potential lenders in the Better Business Bureau Database.
Check out this infographic to learn about the true cost of borrowing.
How can I qualify for a loan with bad credit in New Brunswick?
How can I improve my bad credit?
Can I get a loan in New Brunswick without a credit check?
What Loans Canada Can Do For New Brunswick Borrowers
If you’re a New Brunswick borrower and you have bad credit or just want access to a variety of solid credit products, apply with Loans Canada today! We’ll put you in contact with the best sources of loans for all your financial needs.