In Canada, the credit score of an individual plays an important role when it comes to approval of their loan application. Apart from that, it can also play a vital role in various other important parts of life. For example; employers tend to check the credit score and history of a candidate before hiring them. Moreover, if they are applying for finances for buying a car or home, credit score forms an integral part of their approval chances.
What is a Credit Score?
A credit score is a 3 digit score a person is given based on the use and payments of their credit instruments. It forms an integral part of their creditworthiness. Different factors determine the credit score of an individual. These include payment history, credit history, public records, credit used by them and available credit they have, and inquiries made against them etc.
What is a Fair Credit?
A credit score is divided into different categories with particular terms defining the score of an individual. Have a look at these categories and terms used for them:
In Canada, credit score ranges between 300 and 900; the former being the lowest and the latter, the highest. A score between 300 and 500 is considered to be a terrible credit whereas if it lies between 500 and 579, it is called very poor. From 580 to 619, a credit score is called poor while if it falls between 620 and 680, it is average credit.
From 680 to 719 and 720 to 779, the credit score is good and very good respectively. If a person has a credit score of over 780, it is considered an excellent credit score. They can have the best rate of interest and no difficulty whatsoever in getting their loan application approved.
If you have a credit score of 650 or above, it can be called a fair credit score.
Impact on Fair Credit on Personal Loans
A personal loan is typically a small value, short-term loan suitable for people who need quick money. It is to be repaid in form of installments and can be either secured or unsecured. A personal loan, as the name suggests, can be obtained for meeting personal financial needs.
When an individual applies for a personal loan, whether from a bank or a private lender, the first thing that is taken into consideration is their credit score. Banks tend to disapprove the loan application of people who do not have a fair credit score. However, private lenders are willing to offer personal loans but they, generally, offer these loans at a higher rate of interest. This is the major reason it is recommended to have a fair credit score as it can help to get a personal loan easily and on favorable terms and conditions.
If you have a fair credit score, there will be no complications or hassles in getting the type of loan, whether secured or unsecured. Furthermore, you will be in a position to negotiate the terms with the lender as well and make loan repayment more convenient for yourself.
Even if you don’t have a fair credit score, you can find a personal loan at favorable terms but for this, you will have to do ample research to find a reliable private lender. It can prove to be quite a time and effort consuming.
A Key Advice
Simply put, whether or not you require a personal loan, it is advised to take quick measures to improve your credit score at your earliest.