You've heard about good credit and bad credit, but do you know what the difference is? Why do some people have "good" reports, while others have "bad" reports? Is there a way to determine what kind of report you have? Essentially, when a lender looks at your credit report, they are looking for a couple of important details. Details such as:
- Have you been able to handle credit in the past?
- How much credit do you currently have?
- What is your income to debt ratio?
All of these things are important in the eyes of a lender. Therefore, a good credit report must reflect positively upon all of the above questions. In addition, a good credit report instantly shows creditors that:
- Many other lenders have successfully loaned you money.
- You make all payments on time each month
- You contribute to RRSPs (this shows future financial responsibility)
- You can handle your own finances.
Now, let's take a look at a bad credit report. Red flags are instantly raised if your credit report shows:
- Only a couple of lenders have given you loans
- You do not make payments on time
- All of your credit cards are over their limits
- You do not contribute to any RRSPs
- You have filed for bankruptcy at some point
- You cannot handle your finances
If you have been refused credit time and again, you can bet that you have a bad credit report. So, how do you turn a bad credit report into a good one? For starters, you take out another loan.
This may seem entirely contradictory, but borrowing more money will show creditors that you can now handle your funds. How? When you borrow money from a private lender, you will have to pay this loan back within a short amount of time.
Upon successfully paying back a private loan, you will prove to future lenders that borrowing money is not an issue for you. Why apply for a private loan? Chances are that most traditional lenders will not loan you money if you have a bad credit report - this is where private lenders come in handy.
Some private lenders offer secured loans and therefore do not base your loan approval upon your credit report. Instead, this type of loan is based upon other aspects such as the total worth of your car or proof of a steady income. Try to turn keep your credit report on the "good " side by keeping the above details in mind, and applying for a private loan.
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