What are Bad Credit Scores?

When in dire need of money to solve your financial problems or fix your financial mess and you approached a lender for a loan, you probably didn’t think of your chances of paying back, and paying back in time? You are probably too immersed in the urgency of that need to not think of how to pay back? Truth is, lenders don’t care about how the money they lent you brought a turn around or glimmer of hope in your life, all they care about is how and when you’d pay them back. And of course, pay them back with the agreed interest rate.
What are Bad Credit Scores?
When someone is said to have bad credit, it means they had difficulty in paying back a loan in the past and a lender is finding it difficult to trust them enough to lend them another one Well, because they feel it’s not safe. Lenders don’t like borrowers with elevated credit risk. They believe that it might be difficult to get back their money from people with such bad credit history. In Canada, credit scores range from 300, which is considered the lowest, up to 900, which is the best score. According to TransUnion Canada, 650 credit score is considered a fair score. But a score above 650 will qualify you for a standard loan. Anything below this will pose a difficulty in getting loans.
How can bad credit score affect you?
Asking how a bad credit score will affect you is like asking how your inability to pay back a loan to your lender will affect your collateral. Bad credit score is not something that anyone would like to experience, because it doesn’t look good on anyone. A bad credit score will affect you in so many ways, and its effects are negative. Here are ways a bad credit score can affect you.
 Eligibility for a loan: Your credit card reports are binoculars that help lenders read through your financial history. They are the informative statements that lenders use to decide who you are and whether or not you are eligible for a loan. Definitely, a bad credit score will not make you look good in front of any financial institution. A credit score less than 575 in Canada is considered poor and weak.
 Difficulty in getting approval for a loan: Bad credit score is directly tied to your chance of getting approval for a new loan or credit. The lower your score, the slimmer the chances of you getting a willing lender. Most lenders have cutoff points for borrowers to get eligible for their loans, once you don’t meet their cutoff, you will be denied new credit. Even if you are close to cut off, some will still not consider you.
 Higher rates on approved loan: Some lender see no reason why they shouldn’t approve a loan for someone with a bad credit score, because they see it as an exploitative means, an opportunity to charge unreasonable interest rates and impose restrictive terms to borrowers.
 High insurance premiums: Timely payment histories, a reasonable and outstanding level of debt are of utmost importance to insurers, this might affect borrowers with bad credit score, thereby causing them to pay more than their counterparts with good credit cards.
 Difficulties getting personal issues done: Having a bad credit score can sure pose a great problem while getting an apartment, securing a job or security clearance.

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