Why You Should Try to Strengthen Your Credit Score
For many of life’s biggest purchases, like a car or house, you probably won’t have all the money you need readily available. When you get loans in Montreal, you enter into an agreement with a lending institution that will allow you to pay off the remaining balance (plus interest) over an extended period of time. However, for pretty much every loan other than a payday advance, your credit score will make or break your loan capabilities. Here’s what you should know about your credit score.
How Does Your Credit Score Affect Loans?
The higher your credit score, the better — and the higher your credit score, the more likely you’ll be able to secure a lower interest rate. While the difference between a four or five percent interest rate may not seem like much, over the course of traditional 30-year mortgage, that difference can add up to several thousand dollars.
If you have a particularly low credit score, you may also have a hard time finding lenders who are willing to give you a loan. Quite simply, if your past history shows you don’t always pay back the money that you owe, lenders will view you as a higher risk. To protect their own interests, they may give you a much higher interest rate or decline your application entirely.
Improving Your Credit Score
So how can you improve your credit score? The most basic (and important) thing you can do is pay all of your bills on time. This includes credit card bills, monthly rent and utility payments, and other loan obligations, such as a car loan or student loan. You should also try to limit your spending on your credit cards. If you carry a high balance that is over 30% of your credit limit, this can hurt your score.
If you’ve allowed credit card debt to pile up, pay down the cards with the highest balance first, while still making at least the minimum payments on other cards. This will also lower interest payments on your current debts. Balance transfers can also free up credit space and make it easier to pay off old debts. Ultimately, the key is to take better control of your finances so you can prove yourself to be stable and reliable as a loan recipient.
Repairing bad credit or building good credit generally isn’t an overnight fix — it requires that you consistently pay off bills and debts and practice sound financial habits. However, by making a concerted effort to improve your credit score, you will be able to dramatically improve your personal financial situation and qualify for the loans you seek.