Borrowing money in Canada requires an individual to have a good credit score. A credit score is a 3-digit number that shows your ability to take the risk of getting a loan and paying it back on time. Canadians are typically not allowed to borrow money if they don’t have a credit score with them.
For those who have good credit scores, there are several loan options to avail of a good amount of money. But few agencies have been allowing personal loans for bad credit scores in Canada. What exactly is the credit score? How far it is important to have a credit score to borrow a loan?
Here are some answers to the relevant questions that will tell you everything you need to know about credit scores in Canada.
What is a Credit Score?
A credit score in Canada is a three-digit number that ranges from 300-900. It shows how fast you have paid off your previous debts and the possible risk of lending money to you in the future. The more is the score the more responsible you are considered.
Who calculates your credit score?
In Canada, there are two rating agencies: Equifax and Trans Union. Both agencies have been authorized to fetch your details and make a report of your credit history. They allow the lenders to see the credit reports to check the ability of the borrower to pay back the loan amount. The agencies’ main job is to find the relevant information about the borrowers and cross-check. The credit scores are applicable all over the country for money borrowing purposes.
What are the factors that influence credit score?
Payment History: The more quickly you pay back your loans; the better will be your credit scores. Rating agencies typically monitor your payment history for calculating a credit score.
Number of Loans: Your portfolio of credits from different institutions affects the credit report to a great extent. No matter how diverse your credit portfolio is the timely payment of all types of loans shows that you are responsible enough to meet your liabilities.
Utilization of the Credit: Even if you have a diverse portfolio the amount borrowed must be utilized for a particular purpose. Keep your credit limits on the various lines of credit lower. It will be an important factor in deciding your credit score.
How to Improve Your Credit Score?
To improve your credit score, try to pay your bills on time. The timely payment of bills can strengthen your credit report status. Also, keep in mind to reduce credit utilization. Always keep an eye on soft credit checks and hard credit checks. Make sure you do not submit any misinformation to the agency. Remember that any error or any negative score can stay in your credit report for a longer time. Do take care in providing correct details to the reporting agency.
If you have had trouble getting a loan then your credit report can play an important role in getting the approval. While it may be important to improve your credit score if you possess a low score, don’t get obsessed with your credit report. Other factors play an equally important role in getting a loan.