How can a car loan improve your credit score?
If you need to improve your credit score in Canada, you will likely be in one of two conditions: you may not have borrowed much if you are just starting to use credit or you got into some financial troubles that damaged your credit score. The good news is that taking out a car loan is one of the faster ways that consumers can improve their credit score.
How is my credit score in Canada calculated?
Two major bureaus in Canada maintain your credit history records. They are TransUnion and Equifax. These two bureaus work with the information given to them by creditors about the loans you have, the amount of the loans, how long you have been using credit, and your payment history.
The information and your credit score should be very similar on both systems. If it is not, you should check your credit report carefully for mistakes. You can get one free credit report for each bureau every year and whenever you are turned down for a loan.
How do I get a copy of my credit report?
You may find it useful to pay for a service that will help you monitor your credit report and credit score for changes. Here is the link for the paid services for TransUnion Canada credit report and Equifax Canada credit report.
To get a free report from TransUnion Canada, request a copy of your Consumer Disclosure report. You can get the report online or by mail. To get a free report from Equifax Canada, use this downloadable application. The application has to be filled out and mailed in with copies of proper identification. Please note, these free reports do not give a credit score, only your credit history.
What is a good credit score?
The highest credit score in Canada is a perfect 900. The lowest possible credit score is 300. TransUnion says that a Canadian credit score of 650 is average and will likely qualify a person for a standard loan. A person with a credit score that is lower than 650 may encounter difficulty getting a loan and pay higher interest rates if approved.
What should I do if I am worried about being turned down for a car loan?
There are specialists in car loans in Ontario that you will want to work with who can help. They provide car loans for just about everybody. You will likely see your credit score start improving in about three to six months after you make your car payments on time. Be sure to set up automatic bill payment for the car loan so you do not forget to pay a bill by accident.
Getting a car loan may improve your credit score as long as you keep the amount you borrow reasonable. If your credit score is already bad, take the time to check your credit report with the two major credit bureaus to look for inaccuracies. Dispute any items on your credit history reports that you disagree with so that you can get them removed from your report.
Once you get your car loan, make sure you pay it back on time and all other credit payments as well. Allow six months to see an improvement in your credit score. With these tips you will be on your way to improving your credit score all in due time.