What’s The Difference Between Good Credit and Bad Credit?
Credit is essential for almost every aspect of life these days. It’s a way to borrow money from lenders in order to buy a home, get a loan to start your own business, or even try and fix your credit. In order for you to have the best possible chance at getting loans, it’s important that you have good credit. Here are some of the differences between good credit and bad credit.
What is good credit?
Good credit is defined as having an excellent history of paying back debts on time. You may have good credit if you never had any late payments or missed payments.
With this type of credit, you are able to secure loans for larger amounts of money and can be approved for a mortgage loan. You’ll also be able to get lower interest rates and sometimes even a better interest rate than someone with bad credit.
The best way to get good credit is by keeping track of your monthly statements and following the rules in them. Your bank will typically send you a statement every month that shows your balance, payment history, and when your next statement will be sent out. To ensure that you have zero late payments in the future, it’s best to keep up with these statements as often as possible.
If you’re worried about not being able to pay off all the debt in your name, don’t worry! There are other ways that you can improve your credit so that lenders will trust you more. If you’re struggling with debt issues, consider speaking to a financial advisor. They offer free counseling services for those who need help managing their finances.
What is bad credit?
Bad credit is a term used by banks to indicate that you have a history of missed payments which would make lenders hesitant to lend you money. Bad credit can happen for a variety of reasons, some of which are outside your control. If you’re having trouble repairing your bad credit, there are certain steps you can take to help improve the situation.
Ways to Improve Your Credit
In order to improve your credit, it’s important that you do what you can within your control. Some things include paying off debt, making on-time payments, and using your credit wisely.
First things first: Get rid of any bad debts that are hanging over your head. If there’s something like a medical bill or an old car payment that you’re still trying to pay off, work on getting it resolved before starting anything else. Paying off debt will increase your chances of getting loans in the future because it shows lenders that you’re responsible with money and have the ability to handle them responsibly.
The difference between good and bad credit
So what is good credit? Good credit means that you have positive “hard” and “soft” information in your credit report.
Here are some of the different types of information in your credit report:
- Credit score
- Payment history
- Credit inquiries
- Debt-to-income ratio
- Total revolving debt
- Length of credit history
Soft information, like payment history, is a little more subjective than hard information, but it’s still an important part of your report. If you pay all your bills on time, then you’re likely to get better rates on loans. But if you’ve been late with a payment or had multiple late payments in the past six months, this will show up on your report as well. This information can also show up as negative soft info and could affect your credit score.
The differences between fair, excellent, and perfect credit
Credit is defined by the company that provides it, but generally speaking there are three different types: fair, excellent, and perfect.
Fair credit means you have a FICO score of less than 660. Excellent credit means you have a FICO score of more than 760. Perfect credit means you have a FICO score of 850 or higher.
There are some factors that will affect whether your credit is considered fair, excellent or perfect. The main difference between fair and excellent is how long you’ve been using credit–the longer the better. For example, using credit for six years would be considered excellent while using it for three years would be considered fair.
Some other factors that affect how good your credit is include:
- Your payment history
- Your SIN has been verified
- Your income has been verified
- Your employment history has been verified
- Any liens on your property (mortgages) are clear and current
- Any judgments on your behalf are clear and current
If you want to improve your chances at getting loans in the future, make sure that all of these factors have been completed properly before applying for any loans!
How to improve your credit.
While some people will be able to improve their credit by spending less and saving more, others may find that there are no feasible solutions. That said, there are still ways to improve your credit without going into debt.
Here are six tips for improving your credit score:
- Pay your bills on time and in full
- Keep the amount of debt you carry low
- Never miss a payment
- Don’t carry too many cards or open too many accounts
- Close old accounts that you no longer need or use regularly
- Pay down any high interest debt
We here at Capital Mortgages look forward to assisting you with Ottawa mortgage needs. Contact us today by calling us at: 613-228-3888 or email us direct at: info@capitalmortgages.com
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