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A credit score of less than 579 is considered a bad credit score by most lenders in Canada. A credit report is a metric used by lenders to determine a borrower's level of trustworthiness, or the likelihood that a person will repay any funds loaned through a line of credit.
Canadians have their financial history provided by two agencies: TransUnion and Equifax. Your credit report can range from 300 to 900.
Here is a rough breakdown of the tiers you can fall into:
● 300 – 579 (Poor) A score in this range places you firmly in the category of what is considered bad credit, meaning it is unlikely that you will be approved for most loans.
● 580 – 669 (Fair) A fair credit score means you may still be denied credit, but you will likely pay the highest interest rate on any borrowed amount if you are approved.
● 670 – 739 (Good) A score in this range means you have better odds of being approved for credit but will likely still pay higher interest rates.
● 740 – 799 (Very Good) You can expect to be approved for most credit applications and pay lower interest rates on any borrowed funds.
● 800 and Higher (Excellent) You have the best odds of approval and will usually be given the best available rates.
Understanding your credit score can be confusing, but getting it right will pay off.
While your credit score can have a huge impact on your financial life, it's important to know that you still have lending options available to you, even with bad credit.
There is a lot of confusion surrounding credit score ranges and their meaning. It can often be difficult to determine the difference between a good score and a bad one. So what exactly is a bad credit score, and what makes it that way?
Let’s look at bad credit scores a little more closely and see how you can bring that number up.
• Why is Your Credit Score Bad?
• How is a Bad Credit Score Calculated?
• How Can a Bad Credit Score Affect You?
• Examples of Bad Credit
• How Quickly Can I Raise My Credit Score?
• Can I still Get Access to Credit with a Low Score?
Your overall score may be low for a variety of reasons related to your financial habits, for example:
• Late or missed payments
• High levels of debt
• Excessive inquiries for new credit
• Defaulting on a loan
• Filing for bankruptcy, among other reasons.
In general, spending beyond your means and neglecting financing payments will result in bad credit.
Credit score is calculated using a complex algorithm that weighs different aspects of the financial behaviours of an individual. Because of this, many people are unaware of what kind of activity hurts their credit.
Here are factors that affect your credit and the percentage of your total score that they make up.
This has the largest impact on your overall number. When you make on-time payments, it enhances your score in this category, but these will significantly lower your score when you miss payments on loans or credit cards. You can help your score by ensuring you never make a late payment on a credit card or any outstanding debt.
This metric measures the amount of debt you have relative to your available credit. If you have maxed out credit cards, you likely have a high debt ratio that can hurt your score. It's best to keep your debt ratio below 30% to keep a good credit score. However, the lower the debt ratio you have, the better.
This measures the age of your oldest credit account and the average age of all of your accounts combined. The longer your credit history, the more it helps your score. It is best to leave your oldest credit accounts open to keep your credit history length. Unfortunately, this metric can only be improved with a long history of responsible credit behaviour.
Having diverse types of credit, such as credit cards, auto loans, personal loans or home loans, will improve your score. Managing multiple types of credit shows lenders that you are responsible enough to handle different types of loans.
When you apply for credit or a loan, a lender will conduct a hard pull on your credit that impacts your score by a small number of points. These inquiries will generally show up on your credit report for at least two years. Having too many hard pulls on your credit within a short period of time suggests that you are overextended financially to credit agencies. Only apply for new credit when needed.
Bad credit can have a major impact on your life, both financially and personally. A bad score can make you ineligible for a wide range of financial products. You will likely have some difficulty getting approved for a personal or auto loan and will have to pay higher interest rates on any money you borrow.
This is especially true if you are looking to get approved for a mortgage to buy a home. Bad credit can also cause you to pay higher premiums for different insurance types, potentially costing you a substantial sum of money over time.
You may even experience difficulty being approved for a rental or job application as many landlords and employers will look at bad credit as a sign that you are a greater risk to rent to or employ. Creditworthiness is widely viewed as an indicator of a person's level of responsibility.
On the contrary, having good credit can bring many perks to your financial and personal life. Good credit can help you get approved for loans easily, with larger approval amounts and lower interest rates to save you money on borrowing.
A good credit score will also increase the types of credit cards available to you. The best credit cards offer rewarding features like cash back or valuable bonus points that can be redeemed for travel or other merchandise. These perks can be worth hundreds or even thousands of dollars. You can view being able to take advantage of these benefits as a reward for good financial behaviour.
If you have a credit score of 550, for example, that is considered very poor. As a result, it is unlikely that you will be approved for most credit cards or personal loans without additional restrictions, such as being required to put down some form of collateral payment. You may also be turned down for rental applications or job applications within certain industries, especially finance.
Fortunately, bad credit doesn't have to be permanent, no matter how low. There are plenty of ways you can start to get your credit back on track and improve your score.
Ultimately, the quickest way to raise your score is to pay off outstanding debts as soon as possible. Paying down those debts can even have a positive impact on your score within a couple of months. However, if you have a very poor credit rating, you should expect that it will take much longer to see a dramatic score increase.
It is important to understand that improving your credit is not usually something that happens overnight and is often a long-term process that can take months, sometimes years. Rebuilding your creditworthiness takes patience, dedication, and discipline.
Yes! There are still great lending options available to Canadians with poor credit in need of short-term financing or a personal loan. You can get funds with bad credit, thanks to trusted cash advance lenders like iCash, who offer quick cash payment options to people with low scores.
Instead of demanding collateral or requiring a high credit score, iCash approves your loan requests based on your income and a few other simple factors.
If you have an urgent or unexpected expense, a cash advance can be an excellent option to get you out of a tight spot. You can potentially borrow up to $1,500 through a loan with us.
While you develop a plan to get your credit on track for the long-term, iCash can help you meet your financial needs in the short-term.
Get access to the funds you need today with iCash.
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