Bad Credit History (300-574): What To Do?

Feb 28, 2023

Bad Credit

Bad Credit History

Approval this, approval that, the big words we all want to hear, but lately, we are hearing a lot of inflation, high interest rates, tough approval terms, student debt soaring, reverse mortgages increasing to pay off homes, and more money issues.

For these reasons, many new loan companies are popping up left right and centre. However, this does not necessarily mean you should go hop onto the next catchy lending company just because they would approve you. We will explain why in this blog.

What is Bad Credit History?

First of all you may be wondering how to even know if you have bad credit score and what makes for a bad credit score. A credit score in Canada ranges from 300 to 900, with 300 being the worst possible credit score, and 900 being the best. Anything that is 574 or lower is consider a bad credit score to most banks, lenders, landlords and employers (although most employers will not do a credit check, and even then a credit check only looks at your credit report of debt an payment history).

To get a bad credit score means you are not paying off your debt in a timely manner. Missing one time will not severely hurt your score, but missing consistently and by large amounts will continue to hinder your credit score, especially if you are missing multiple sources of debt payments (car debt, credit debt, mortgage debt, student debt, etc.).

Every piece of information in your credit report has a life of 6 years, which means that if you were to completely make consistent on time correct payments for the next 6 years without missing, you would have erased all your previous bad history and completely flipped your credit score into the higher categories. It does take time, but the earlier you start, the faster it will be to increase that credit score of yours.

What to do if you have a Bad Credit Score?

It is not impossible to get a loan, as some lenders are willing to come to a compromise with your bad credit score and give you the money you need to make a particular purchase.

What is the Catch and What Should I Look Out For?

Many of these lenders, and some new flashy ones trying to get your attention, are not scams. However, that does not mean there are not risks and key things to look out for. These lenders, just like all lenders, need to have some insurance that they will get there money back and some which is why they will have many policies within the fine print.

What are these Policies?

Interest Rates: At this current time, normal interest rates vary from 4.5-9% for many approvals. For someone with bad credit history, interest rates can range from 18-47% for unsecured loans and 10-30% for home equity loans. That is a large percentage of interest and can really hurt your bank account.

Fees: Most lenders have fees such as a documental, application and/or appraisal fee, but lenders for bad credit history clients may bump up those costs or add additional fees, so watch out for it.

Loan Terms: You may not be entitled to as many options for loan term amounts, so please pay attention to the term of the loan and the interest rate for that particular term.

Application Process: Although many lenders are legit, that does not mean that there are not scams out there. If the application process seems fishy, or if there are weird fees or questions needed, please do extra research or contact us.

Conclusion

For these reasons and more, we use only lenders that we trust and know. Working with a mortgage group such as ourselves will eliminate the risk you have and provide you with the best options for your current situation. It is not always possible to find your ideal situation, but we will try the best we can to get the loan, rate and term you are looking for.

Please take a look at our website to learn more about us. We are only a phone call (or email) away!

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