There’s nothing worse than applying for a car loan and discovering you got rejected because of a bad credit score. It can make you feel defeated, disheartened and even embarrassed to find out that in the eyes of your lender, your credit falls short of their expectations.
If it’s any consolation, you’re not the first or last person to be rejected for their bad credit car loan in London. For some, exercising disciplined financial habits can be hard, so it’s not unusual for people to find themselves in a similar position at some point in their lives. If anything, it can become a great learning lesson on how to manage your debts and finances a lot better.
The good news is, there’s a solution for all this and it’s called credit repair. Taking direct action towards improving your score is the best way to rebuild it. In this article, we’ll break down various strategies on how to do that and give you an idea about just how long it’ll take for you to have good credit again.
What Is A Credit Score?
Before we talk about credit repair, we need to talk about what credit is and why it’s important. Ready? Let’s get started!
In Canada, credit scores fall between a range of 300-900 points. The higher your score, the better the credit you have. There are five main factors that contribute to this, which include:
Payment history (35%) – This accounts for your ability to pay back lenders and creditors. This means making payments on time as per your agreement with them. Making sure you pay back all your lenders can help guarantee a positive credit score.
Credit Usage (30%) – Your credit score is also determined by the amount of debt you acquire compared to the amount of credit you have. For example, if you have a credit card with a limit of $3,000 and consistently max it out or hit close to it’s limit every month, it will negatively impact your credit score. To stay on the safe side, you always want to make sure you never pass 35% of your available credit.
Credit Length (15%) – The longer you’ve been with a creditor, the better it is for your credit score, especially if you’re making all your monthly payments on time. In the case that you have to cancel any credit cards, it’s always advised to cancel newer accounts first opposed to older ones.
New Inquiries (10%) – When you apply for a loan, lenders will pull your credit history to see where you stand which might lower your score temporarily, which is very normal. However, if you start applying to a number of different lenders at the same time, your score will really start to plummet. Other lenders will also be able to see these new inquiries which could potentially affect your ability in getting approved. Opening multiple lines of credit will tell lenders that you’re at financial risk, which may deter them from giving you the loan.
Account Diversity (10%) – Having a diverse range of debt products under your name can positively impact your credit score. This includes anything from credit card accounts and installment loans like bad credit car loans. Why is this important? People with multiple debt products are typically viewed as lower risk than those who don’t have anything because they’ve proven that they’re able to manage the debt responsibly.
Pro tip: Canadians are entitled to pull one free credit report from each of Canada’s credit bureaus, Equifax and TransUnion, once a year without it affecting their credit score. Checking your credit report can help you better understand where your credit score sits and whether you need to take any direct action towards improving it.
Now that we know we know what contributes to your credit score, let’s talk about why it’s important.
Credit scores can impact your eligibility of getting approved for loans, which can affect your eligibility for rental housing, and landing certain jobs.
What credit score should you aim for?
Aim to have it at 650 or higher, as that’s the benchmark number that will allow you to qualify for most standard loans. Anything lower and the process will become a lot more difficult for you. If you score 700 or higher (high five!), you’re usually able to qualify for loans with the best interest rates. If you find yourself on the opposite end of the scale at 580 or lower, it’s nearly impossible to qualify for anything which means it’s time to consider credit repair.
What Is Credit Repair?
Now that we understand what credit scores are and what qualifies as good and bad credit, we can discuss what credit repair is.
Credit repair is taking direct action towards improving your credit score. There are different approaches you can take to achieve this like repairing it solo, getting credit counselling or going to a credit repair company.
As we mentioned earlier, if your credit score falls at 580 or lower you need to seriously consider credit repair or else it can really start to impact your life in ways you may not have considered before. Before you decide which route you’d like to take, access your credit report and circle in on all the factors that may have contributed to your low score. Once you can identify those reasons, you’ll have a better idea of what strategy you should to take to help rebuild your credit.
Methods Of Credit Repair
Doing It Solo
Before taking any alternative route, the best way to repair your credit is to try and repair it yourself. A lot of credit repair services out there do exactly what you can do at home for free. The only difference is that you’re paying for their experience in navigating the system and disputing your cases on your behalf. This can be a tedious task for those who aren’t used to doing it but it gets easier the more you do it.
Hiring A Credit Repair Company
A credit repair company’s main purpose is to dispute credit issues with credit bureaus on your behalf. In order to do this, they pull your credit report from all major Canadian credit bureaus and thoroughly look through them to identify errors or discrepancies. As soon as they identify any errors, they’ll report them to the credit bureau and try to get them removed off of your account. These changes have the potential to significantly improve your credit score.
It’s important to note that going with a credit repair company isn’t for everyone. They primarily focus on making corrections to your credit report. If your credit has been impacted because of your failure to make payments back on certain loans, you’ll have to go through a different route to help rebuild our score.
If you need a bit more hand holding in terms of getting your credit under control, credit counselling is a great and affordable option. Their main purpose is to provide people the tools they need to get their finances under control. In addition to helping get your credit back on track, credit counselling is also great if you need help becoming more financially disciplined.
Depending on where you go, they typically offer personalized one-on-one sessions, group sessions or seminars. Unlike alternative routes like credit repair companies, counselling is often the more favourable option because it’s typically free or available at a much lower cost.
Getting A Car Loan
Sounds counterintuitive, right? But if done properly, getting a car loan could actually help you improve your credit. Firstly, look for a lender that will fight for you! If you suffer from bad credit, going through major financial institutions like banks and credit unions might not be the best route. Why?
They’re sticklers for having strict lender requirements which typically include specific income and credit stipulations. Thankfully there are other options on the market that specialize in bad credit car loans in London, which gives people the opportunity to get out of their financial rut. LondonBadCreditCarLoans.ca are one those lenders who take pride in striking the best deals for their clients. Thanks to their web of trusted financial institutions, they leverage their relationships to negotiate a car loan that works within your budget.
Once you get approved, all you have to do is make sure you pay your monthly installments and within the next few months, you’ll start to see your credit rebuild.
How Long Does Credit Repair Take?
Unfortunately, there is no quick and easy solutions to repairing your credit score. No matter which route you decide to take, it will all require some level of patience and discipline. It also depends on how bad your credit score is and why it scored there in the first place.
If your bad credit is a result of too much debt, the best way to handle that is starting to pay them off completely. The more you lower your debt, the quicker you’ll start seeing your credit score improve. There are definitely ways to expedite this process but it won’t happen without making some sacrifices. It may require you to live on a more stricter budget and not spend carelessly for the next little while, especially if you plan on paying back in bigger installments.
In the worst case scenario, maybe you’ve filed for bankruptcy in the past. If that’s the case, it can take a couple of years before you see your credit score back in the green again. In cases like this, you may want to implement of number of different strategies to help get yourself back on track. A mixture of solo repair and credit counselling is a good place to start, as well as filing for a bad credit car loan in London. No matter how dire you think your situation is, LondonBadCreditCarLoans.ca and help turn things around and line you up with an auto loan that can help kickstart your credit repair journey.
Remember, repairing your credit score is only half the battle. Once you’ve gotten it back to a healthy place, you’re going to want to keep it there. You could have the best credit score out there, but one missed payment or another negative event to your credit history, and it could all take a nosedive for the worst.
As you begin to rebuild your credit, take all the lessons you’ve learned along the way and implement those strategies into your everyday life. Be sure to manage your money properly and exercise financial discipline to ensure that you don’t get caught with a low score again.