Good credit can make many financial situations in life easier and cheaper. For example, with good credit, you can get approval for a mortgage or auto loan and may be eligible for the best interest rates and terms. A good credit score also affects how much you pay for insurance and whether the utility company requires little or no deposit before providing services to you. If you have made financial mistakes in the past, your credit score may not be as high as you hoped. If these past negative items are accurate, you won’t be able to remove them from your credit report immediately, but you can take steps to rebuild a more positive credit history from today and improve your credit in the future.
What's Effects Your Credit Scores?
Many factors can affect credit scores. Some of the most common credit scoring factors are:
– Public Record: If you had any bankruptcies or civil judgments.
– History: the age of our credit accounts.
– Credit types: the types of credit you are using.
– Debt: total amount of debt you have, including collections, credit cards, loans, and other credit accounts.
– Credit Utilization Ration: total amount of credit you have available to you with how much of it you are actually using right now.
– Payment History: any late payments, on time payments or missed payments.
– Inquiries: hard inquiries or soft inquiries. Your recent applications for new credit.
Taking Steps to Rebuild Your Credit
If your credit score is lower than your expectations, please know that the change begins with you! The steps you take to change your credit behavior are usually reflected in your credit score over time, because the data in your score includes all the actions you have done on credit.
1. Pay Bills on time: Always pay your bills on time, every month.
2. Credit Utilization Ration: Keep your credit ration below 30%
3. Get Help with Debt: Credit counseling, debt management plan, debt consolidation all can help with paying your debt.
How Long Does It Take to Rebuild Credit?
The time required to fix your credit score will depend on the type of mark on your report. It is important to know how long the process of repairing credit will take so that you can plan ahead effectively.
There are many factors that affect your credit score. Credit utilization, the frequency of full payments on time, and the total length of your credit history will all determine where your score lies between the 300-900 scoring system.
According to data from TransUnion, one of Canada’s major credit bureaus, Canada’s average credit score is 650. However, approximately 20% of Canadians have a credit score below 600. Individuals with a credit score of less than 600 are considered subprime or Non-prime.
Subprime consumer’s may have a slightly higher loan approval rate because such consumers are considered to have a higher risk of default due to imperfect credit reports.
Although prime borrowers (Canadians with credit scores above 650) are more attractive to lenders and generally receive lower interest rates, it is not impossible for loans with lower credit scores to be approved for higher interest rates.
If you are a subprime customer, the good news is that you don’t always need to be a subprime customer. Improving your credit score starts with understanding financial issues.
