It can be easy to let your credit score slip and sink below the threshold usually required to get approved for traditional loans and credit accounts. Without a decent credit score, it can be difficult for you to be able to secure a mortgage, car loan, or credit card in Markham.
With continued late or missed payments, extreme credit card spending, and constant loan and credit applications, your credit score can really take a hit. If you’re guilty of any one (or all) of these habits, you may have noticed that your credit score isn’t nearly as high as it could – and should – be.
If you have bad credit and are finding it difficult to get approved for a conventional loan, there may be other alternatives available to you. Read on to find out more about bad credit loans in Markham and how they might be a viable option for you despite your low credit score.
What do bad credit lenders look at when approving an application? Find out here.
What is Bad Credit?
Simply put, bad credit refers to a low credit score. More specifically, anything below 600.
With a bad credit score, securing just about any type of credit or loans can prove to be a real challenge. A credit score is a measure of a person’s financial health and background.
A low credit score typically suggests that the consumer is more of a risk and more likely to default on loan payments, while a good credit score suggests that the consumer is responsible with their spending and payment habits. As such, the latter is considered less of a risk and more likely to get approved for a loan.
Not only can bad credit make it tough to get a loan or credit card, but it can have a detrimental effect on other aspects of your life in Markham, including making it more difficult to get:
- An apartment
- A cell phone contract
- Insurance
- a new job
Canadian Credit Score Ranges
Credit scores range from anywhere between 300 to 900, with 300 being the worst and 900 being perfect. Generally speaking, lenders and creditors require that borrowers have a credit score of at least 650 to 680 to get approved for a loan or credit card, though the exact number will depend on a few other financial factors and the lender.
There are many important factors that impact a person’s credit score, including the following:
Payment history – Keeping up with bill payments has a positive effect on your credit score, while missing payments does the opposite.
Debt load – The more debt you have on the books, the harder it is to keep up with your payments. Lots of debt also weighs heavily on your income, which can have an impact on your ability to secure a loan.
Credit utilization – Spending close to your credit limit on your credit card increases your credit utilization ratio, which is a bad thing for your credit score. As such, it’s recommended to keep your credit card spending to no more than 20% to 30% of your credit limit.
Hard inquiries – Every time you apply for a new loan or line of credit, the lender will pull your credit report, which will be noted as a hard inquiry, in order to check out your financial health and credit score (for more information about getting your credit checked, click here). This can temporarily cause your credit score to dip.
Loan diversity – It’s suggested that having a handful of different types of loans and credit accounts shows your ability to manage various accounts, which is a good thing for your credit score.
Credit history length – If you have no credit history, lenders will have little information to base any lending decisions on. But with a much longer credit history, you’ll be able to give lenders more of an accurate picture of the type of borrower that you are.
Did you know that bad credit can affect your daily life? Learn more here.
What Causes Bad Credit in Markham?
The above-mentioned factors have a direct impact on your credit score, but certain circumstances may cause you to be unable to make all of your bill payments on time, which can negatively affect your credit:
- Irresponsible financial habits
- Loss of job
- Medical emergency
- Injury that results in the inability to work
Loan Types For Bad Credit Borrowers in Markham
If you’re unable to get approved for a conventional loan in Markham because of a bad credit score, there are other loan options that you can look into:
Secured loans. A secured loan is easier to get approved for compared to an unsecured loan because it requires collateral. A valuable asset that collateralizes a loan gives a bit of security to your lender in Markham and therefore minimizes their risk. If the loan is defaulted on, the lender can repossess the asset and sell it to recoup any lost profits.
20 different ways you can secure a loan, check this out.
No-credit check loans. Traditional lenders in Markham want to see what a borrower’s credit score is before they extend a loan to assess the level of risk. But if you have a bad credit score, you probably don’t want the lender to do a credit check on you.
In this case, you may want to look into no-credit-check loans whereby lenders in Markham look at other factors – such as income, assets, and most recent financial activity – instead of your credit score. This can be an attractive alternative for borrowers in Markham with bad credit.
Be on the Lookout For Loan Scams in Markham
Most lenders and loan products are legitimate in Markham. But there are also a few predatory lenders who prey on unsuspecting and vulnerable borrowers in Markham who may be desperate for extra money. These lenders will conduct loan scams that lure in borrowers and end up placing them in a vicious cycle of unending debt.
Some red flags to look out for include:
- Guaranteed loan approval
- Mandatory upfront fees
- Mandatory insurance
- Only wire transfers accepted
Check out this infographic for even more information about Canadian credit scores.
Increase Your Chances of Loan Approval by Boosting Your Credit Score
Bad credit loans in Markham provide bad credit borrowers with a great opportunity to access funds needed from a loan. But you may also want to take some time to improve your credit score in order to be able to secure a conventional loan in Markham at a decent interest rate without having to resort to bad credit loans.
Some things you can do to boost your credit score include:
- Making bill payments on time and in full every month
- Not spending any more than 30% of your credit limit on your credit cards
- Make every effort to pay down your debt
- Not applying for too many loans within a short time period
- Keeping old credit accounts open (especially with outstanding balances)
Looking For a Bad Credit Loan Markham?
If you’re in need of a loan but bad credit is an obstacle, there may be a bad credit loan available for you. Get in touch with Loans Canada today and we’ll put you in touch with a reputable bad credit lender in Markham who can help provide you with the much-needed funds. Call us today!
