What is a poor credit, and what constitutes a poor credit? I will answer these questions as well as tell you where to find your credit report.

Sometimes in life, things don’t always pan out the way we intend to. There’s still this grand scheme in our head that we think we’ll materialize itself if we simply follow the proper path. Well, the older we get, the more life will throw hurdles at our plan. Eventually, our grand scheme A is modified and becomes plan A1. Finally, in due time, it morphs into Plan « How did I accumulate this much debt?».

Unfortunately, when you start having late payments, creditors intrude in your credit file and ruin it. Consequently, leaving a gift that will ruin your life for the next seven years: a poor credit.

What is poor credit

What is poor credit?

Anybody that has any type of credit with a reputable financial institution needs to be aware of this. Every month, that financial institution reports your payment history to a credit reporting agency. Subsequently, if there are payments 30, 60, 90 days late or more, these institutions share that information with either Equifax or Transunion. More on these two later in the post. In brief, these monthly reports establish what is called your creditworthiness.

In all honesty, a poor credit simply means that your creditworthiness is low, and it presents a high risk of default.

Understandably, only accredited institutions have access to your credit file and solely with your written permission. Any institution that lends money wants to increase the probability of getting paid back. If, according to your credit bureau, the defaulting risks are too high, they will simply not lend you anything.

Maybe there were late payments on multiple occasions for 30 days or more? Maybe there was only one late payment for 30 days or more? All these situations affect your credit score, and they stay in your file for a very long time. However,  the opposite is also exact. Always paying on time is also reflected in your credit file; hence more institutions will be eager to lend you money.

Why do you have poor credit, and where can you get your credit report?

In Canada, there are two central private credit reporting agencies, Equifax and Transunion. These credit reporting agencies are responsible for keeping all your payment history safe and secure from prying eyes. Accordingly, they only divulge that information is when there’s a request from either an accredited institution or from yourself. Howbeit, even if it’s an accredited institution, it still needs your written authorization to view anything.

There are two ways to access your credit information. One method is free, and the other is not. Firstly, send a letter requesting your credit report to either of these entities as previously stated; they will send it for free. In consequence, it will take more time to receive it. Nonetheless, if you’re in a hurry, there’s also a solution. Either website grants immediate access to your credit report for around $30 at the time of writing.

For security purposes, ask for your credit report at least once per year. Indeed, it might have errors/typos, or your file might be the target of an identity thief, amongst other reasons. Thus, any reason is a good one to verify its accuracy.


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What information is on my credit report?

The reporting agencies commonly layout the information like this:

  1. You will see your name and its variations.
    1. It’s essential to confirm the validity of that information to avoid a heap of problems if the information is incorrect.
  2. Current and previous addresses.
    1. If the address is less than 12 months old, the other addresses might appear.
  3. Current employer.
    1. Lender usually verify that information as confirmation of employment.
  4. Revolving accounts.
    1. Credit cards and credit lines are types of revolving accounts. Examples of statements where the money is readily available provided there’s sufficient credit.
  5. Installment loans.
    1. Mortgages, secured/unsecured loans like car loans, are types of installment loans. You received a fixed amount and have a set period to pay the full amount, including accrued interest.
  6. Open and closed accounts.
    1. Credit accounts that were closed in good standing and utilities like cable companies appear here.
  7. Account payment history.
    1. The payment history of all your credit accounts except payment history that’s older than seven years. In this section, it will show the 30,60,90 days late or more notices.
  8. Recent credit and loan applications.
    1. Here, it enumerates all your credit inquiries for the last 24 months. Usually, there is a separation between soft credit inquiries and hard ones. The former does not affect your credit score while the latter does.
  9. Collection accounts.
    1. All the accounts transferred to a collection agency appear here. That information usually stays there for about seven years. Anything that appears in this section is detrimental to your credit report.
  10. Public records.
    1. Here you will see things like bankruptcy, foreclosures or consumer proposal.
      1. Lenders will deny your request for additional credit if anything appears in this field. A bankruptcy stays in your file for seven years.

How can I improve my credit score?

There are no miracle solutions to improving your credit score, but it’s not impossible. In this next segment, I’m offering effective options you can use immediately.


Cancel all the credit you don’t use and don’t need.

Initially, if possible, cancel all the credit, not in use and that you don’t need. That includes credit cards, loans and lines of credit. The credit reporting agencies view available credit limits as potential usable credit.

For example, on a credit card with a 5000$ limit and a 0$ dollar balance, the credit reporting agencies will still view it as a 5000$ liability. It’s a situation that might hinder your total borrowing capacity. Moreover, if there’s no activity on the credit account, it also subtracts points from your credit score. Don’t want that to happen? Cancel all the unnecessary and unused credit.

Get a consolidation loan or refinance your property.

Having too many credit accounts is as bad as having no credit accounts at all. To rapidly improve your credit score, centralize all your accounts and use a consolidation loan.

Thus, if you have a car loan, a mortgage, a credit card, a personal loan and a line of credit, it would be to your advantage to streamline everything. A consolidation loan allows you to regroup everything into one big loan with a monthly repayment schedule. Then lower your credit limit on the line of credit and use it for emergency purchases. Keep a line of credit, albeit with a reduced limit, and you benefit from the regular low-interest rates that these products usually provide.

I don’t always suggest combining everything into a mortgage because it might cost more in interests in the long run.  Decide which solution fits your needs between refinancing your mortgage or taking out an unsecured consolidation loan. The interest rate difference between the two options can save or cost you thousands of dollars. Thus, it’s essential to know how these lending products calculate interest.

Are you experiencing deeper issues with your credit?

RELATED ARTICLE: How do you calculate interest rates and how it can make you rich. It will significantly help you.

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