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How to Get Back to Prime Rates by Improving Your Credit Score

Many Canadians lack financial literacy and fail to understand the importance of having a high credit score, and given the current economic climate, building your credit score may not be a priority. However, it’s something that should always be top of mind.
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“Over 9 million Canadians are considered non-prime simply because their credit score is below 700. Our goal is to help Canadians improve their financial outcomes and graduate to prime credit through our commitment to providing free access to financial education,” says Andrea Fiederer, Executive Vice President & Chief Marketing Officer of goeasy Academy. “The purpose of goeasy Academy is to provide hardworking Canadians with access to free financial education to help them get on a path to a better financial future. We know that every situation is unique, and each person faces their own set of financial challenges. goeasy Academy offers informative financial literacy articles, calculators, quizzes and ebooks that can help develop healthy financial habits.”

How Does Credit Work?

Credit is when money is borrowed from a lender, usually in the form of a credit card or loan. The cost of lending the money is charged as interest on that credit card or loan. The borrower has a set amount of time to pay back the principal, and its interest. Payments are typically scheduled monthly, weekly, or bi-weekly. It’s important to make your payments on time, as your credit score can decrease if your payments are late.

TransUnion and Equifax determine Canadians’ credit scores by assessing: payment history, how much credit you have available, the length of your credit history, and how many inquiries are open on your file.

Generally, scores between 660-724 are good, 725-759 are very good, and 760+ are rated excellent. Scores of 560 and below are considered a low or a “poor” score, meaning that individual will have a harder time qualifying for a traditional loan with optimal rates. Those with lower scores should seek out a lender, like easyfinancial, that is willing to work with them to rebuild their credit.

What are Bad Credit Loans?

Credit cards are not always the answer to building up a credit score. Credit cards have revolving credit, meaning as you pay them down, that credit is available to be used again. Personal loans, on the other hand have a declining balance as they are paid off.

Loans for bad credit can help you get back on track. These are loans offered to those with a lower credit score by a lender willing to assume some risk. Another option is a debt consolidation loan that combines several of your debts into one payment. A bad credit loan can help you manage unexpected expenses such as car repairs or replacing a hot water tank. Without access to bad credit loans, many get sucked into cycle of high interest payday loans – offered by aggressive lenders that have profit, not customer’s needs in mind. Bad credit loans and debt consolidation loans give you relief from payday lenders, or having to pay interest on several loans, several times a month. Instead you can get one loan payment and a lower interest rate.

How to Develop a High Credit Score

Improving your credit score, and therefore access to prime rates, is more than simply making your payments on time. When you apply for a credit card or loan, you need an established credit history to show creditors how you handled credit in the past and to confirm if you can pay back the money you owe. In addition, you should not have a potential debt load (unused loans, unused cards, etc.) that, if accessed, would exceed your ability to service your debt. Newcomers to Canada without a Canadian bank account, for example, may be considered high risk simply because of a lack of credit history.

To build or fix your credit score, start with the following:

Keep track of your bills and pay them on time

It may take a little extra work, but tracking your bills and when they are due, then paying them on time, goes a long way in developing a high credit score. It’s easy to forget a bill when it sits under a pile of papers on the counter, or you miss the reminder emails. However, even if you are good with money but wind up paying bills late, you can damage your score.

Stay on top of your revolving credit

Revolving credit is credit that becomes available to you again after you make a payment. Your credit card or line of equity loan are examples of revolving credit. In addition to making the monthly payments, also track how much interest you have accrued during that month. Pay that amount too, and a little more if you can. Keep your revolving credit balances as low as possible and pay off your credit cards monthly. If you carry a balance, consider the avalanche or snowball method to help you pay off debt faster.

Read your credit report

Annually, contact TransUnion or Equifax and request your credit report. You are entitled to one free report per year. You may find discrepancies that are running your credit score.

Don’t close down too many credit accounts

Closing several credit accounts at once lowers your ability to show that you can use credit responsibly. If the credit card or account doesn’t cost you fees just for staying open, consider leaving a few open (and not using them) to maintain your credit history.

Watch out for multiple inquiries on your account

Refinancing the mortgage, buying a new car, and opening a couple new credit card accounts all at the same time? Every time a lender checks your credit history, you get an inquiry listed on your credit report. Too many inquiries can be a red flag for lenders, no matter how valid those inquires may be. You can see how many inquires are made on your report during your annual review (another reason to get and read your report annually). During this review, it is also a great time to check for any unauthorized inquires that may be hurting your credit score.

It can take some time to rebuild your credit score, especially if you have a bankruptcy or collections on your record. However, it is always worth the time and effort. By doing the things listed above, and with advice found in goeasy Academy, you can be well on your way to a better score today!

Andrea Fiederer concludes, “Hardworking Canadians who are looking to better their financial outcomes will find goeasy Academy to be a valuable resource. We know that 48% of non-prime Canadians turn to online resources to learn about how to better their finances, but with an overwhelming amount of information out there, it’s hard to even know where to start. With content that is tailored to each visitors’ needs, we know that through goeasy Academy, Canadians can begin to learn and develop the necessary skills to successfully manage their finances and make sound financial decisions for the long term.”

Learn More

Visit easyfinancial’s goeasy Academy and your easyfinancial local branch for more information or to apply for a loan.