If you’re a frequent user of credit cards, then chances are that your credit score is always at the back of your mind, especially if you aren’t satisfied with your score and wish to repair it. The reason your credit score is given so much importance is that it affects your chances of getting a loan and also puts a question as to whether your profile qualifies you for one, something that will help you determine the insurance rate for your car, whether you qualify for housing, and whether you stand at a good place financially. This especially becomes important if you’re looking for a good company for car loans in Toronto such as 411 drives.
Now, what you need to question yourself is, how in the first place your credit score goes low, and how buying something might help to improve it?
The reason as to why your credit score mainly falls is because you may have spent more than you could repay at a point of time. However, a decent company for car loans in Toronto, will not just help you to improve your credit score but will ensure that further purchases can take place without much hassle.
So, what exactly lies in a credit file?
Many people don’t really know what is saved in their credit file, which is a little naïve considering the fact that you can simply get a free credit report for yourself and check what lies in it, although it might get a little over whelming since you might not be able to fully grasp what’s written in it.
Nonetheless, if you’re looking to repair your credit score, you will need to know what is there in your credit file, as its contents will directly be impacting your score. Proper management of all your activities ensures that all the right boxes are ticked in your credit file, ensuring your credit score remains fixed.
In relation to car loans, it’s worth mentioning a specific type of loan called a balloon payment car loan. This type of loan is structured in a way that allows borrowers to make smaller monthly payments throughout the loan term, with a large lump sum payment, known as the balloon payment, due at the end.
Some of the key components of your credit score are –
- The payment history –A company for car loans in Toronto will want to see just how good you are with the payment of bills on time, which is why your payment history can easily be considered an important component to your credit score. This will show every time your account was reported by any previous or current creditor, whether for late payment, missed payment or for slow payment of a bill. The more such lapses show up, the more negative your score will get, so the only way to avoid it would be to ensure timely payments.
- The amount owed – The second most important aspect to your credit score is, the amount of debt you have managed to collect through different credit lines. This will let a creditor know whether you have over extended on credit because then they will avoid lending you money to prevent the situation from getting worse.
- The collection of actions as well as public records – In case you haven’t diligently paid all your bills in the past, your account might have been sent to collections. These lapses become visible to potential lenders and they will know of your past records, which might not sit well with them, preventing them from providing you with a loan.
- For inquiries – An inquiry is basically when someone requests to see your credit file. This usually happens when you either apply for credit or authorize an individual or a company to pull up your credit file. There can be two types of inquiries – soft and hard. A soft inquiry is what is visible to other creditors on your file but doesn’t affect your score in any way. A hard inquiry is when there is a dip in your score, and this dip usually stays for a couple of years.
- The credit mix –This mix is looked at by both creditors as well as credit bureaus and it consists of both revolving as well as installment credit lines. Thus, it is necessary for you to have some of both as it conveys your ability to manage both well. While a revolving credit line is when there is a limit to the amount you can borrow, you can also borrow whenever needed, whereas, with an installment loan, you get to borrow a sum of money right up front, and then you will have to pay it back through regularly scheduled installments.
Thus, it would be best for you to opt for a decent company for car loans in Toronto because not only will they ensure that you remain aware of the complete factors to keep in mind when opting for a car loan because even though there might be a subtle dip in your score, over time as you keep clearing the amount, your credit history slowly begins to build as well thereby helping to repair and maintain a proper score in the long run!