When you have to take a car loan in Canada, having a good credit score is crucial. Several financial institutions, especially banks look at your credit history, to determine whether they should approve your application.
It is essential you have a fair credit score, to ensure you get good rates from lenders. In most cases, your credit score should fall between 575 and 650 to come under the fair category. As your score goes higher, financial institutions will consider you to be trustworthy. However, if it falls below 575, it comes under bad credit score, which makes your life difficult.
Despite their importance, a large number of Canadians don’t have sufficient knowledge about them. Here are three facts you didn’t know about credit scores:
Closing credit cards impact your score negatively
If you plan on closing old lines of credit, you should think twice, especially when you are going to take a car loan. A lot of people tend to cancel their credit cards from the past, to consolidate their debt and make repayment manageable.
However, this strategy will have a negative impact on your credit score, as their age plays an essential role. The greater the age of your reporting account, the better it is for your rating.
Financial history remains on your credit score for years
All the actions you take concerning your finances will reflect in your credit score, for several years. For instance, if lenders make inquiries about your rating, it will exist in your history for at least three years. Similarly, collections, foreclosures, and bankruptcies will be present in your credit score for at least six years.
Several businesses send reports to the credit bureaus
People believe that only financial institutions such as banks and third-party lenders are the only ones who report to the credit bureaus in Canada. However, other businesses such as rental, cell phone operators, cable, and utility companies also have a say. Due to this reason, make sure you pay all your bills on time if you want to take a car loan without facing any challenges.
These are the three facts you should know about credit scores. Remember, even if you don’t have a fair credit score, you can still take an auto loan, provided you approach the right lender!