You will most certainly need a loan at least once in your life. Your credit score will help determine if you are eligible to get one or not. Here is a quick view of what a credit score is, and how you can improve it.
A good credit report shows that you always pay on time and that you received loans or credit from various lenders in the past. It is proof that you are in control of your finances.
A bad credit report shows that you did receive credit or loans from various lenders but did not pay on time. You have many maxed-out credit cards and applied many times for credit. Lenders will hesitate to do business with you because you do not control your finances.
So, what is a good or a bad credit score? In Canada, it is calculated by Equifax and TransUnion, which are the two major credit bureaus. They use the information in your credit file, like your payment history and how much debt you have. With this information in hand, you receive a credit score which ranges from 300 to 900. The higher your score, the better your credit. Here are the different score rankings you will encounter:
300 to 599: You have poor credit and need to improve it.
600 to 649: You have fair credit. You will have to prove that you will manage your debts responsibly.
650 to 719: You have good credit. You might not receive the best interest rate offers, but you are on the right track.
720 to 799: You have very good credit. Continue what you are doing, lenders will be happy to lend you money.
800 to 900: You have excellent credit. Do not change a thing.
What to Do
Having a good credit score is essential if you want to be able to get a loan or credit for significant acquisitions like a car or a house. The first step to build up your credit score is to get out of debt. Easier said than done. However, with time, patience and good organisation, it is possible.
Start by making a budget. See what comes in and out, and look at where you can cut off some expenses.
With the extra money you will have from the cut expenses, pay off your debts, one at a time. Start with the one that has the highest interest rate. Pay more than the minimum required. Once you have paid off a debt, move on to the next. When a credit card is paid in full, cancel it.
Meanwhile, if you are in need of a loan for car repairs or other such necessities and banks refuse to lend you money because of your poor credit score, a fast online loan will help you out. They do not check your credit report. You only need a steady job and the means to repay the loan. It is a temporary solution to a temporary problem.
Once you have paid off all your debts, keep one small credit card active but do not max it out. Show your future creditors that you have developed healthy financial habits and that they can trust you to repay any future debts. If you keep these tips in mind, you will have a bright financial future with a high credit score and many credit choices.