If you’re buying a used car in Canada, you’ve probably taken some time to take a look at your credit report. Your credit is critical for financing large purchases like used cars, so it’s important that you understand whether you have good or bad credit – before starting the shopping process.
But after you check your credit, you might be a little bit curious about the results. Maybe you thought you had better credit, or were confused about why you got a low score, even though you’ve never made a late payment on a bill.
Well, whether you’re shopping for a used car or just curious about the biggest mistakes you can make with your credit, we’re here to shed some light on these mysteries! Check out the 5 biggest mistakes you can make with your credit – and you’ll have the tools you need to build up your credit score!
1. Ignoring Your Credit Report
If you’re in Canada, you’re entitled to a free credit report from TransUnion or Equifax Canada. You can request this free credit report once per year, and you should make it a habit to do so.
You can’t understand what’s on your credit report until you’ve actually seen it. Ignoring your credit score just means that there could be outdated debts, mistakes, and other issues that are affecting your credit score – and you don’t even know about it!
So make sure you check your credit report regularly. By doing so, you can avoid issues like fraud and mistaken information, and ensure that your credit is in good health.
2. Not Having Any Credit History At All
Having no debt doesn’t necessarily mean that you’ll have a good credit score. In fact, it’s often the opposite. Your credit history measures your ability to repay debts in a timely manner – and if you’ve never repaid any debts, you won’t have any credit history!
Obviously, it’s a bad idea to start applying for lines of credit just to build up your credit score – but if you’re looking to build up your credit score, you’ll need to take on at least some debt.
3. Missing Payments
Whether it’s for your car loan, credit card, or student loan, you should avoid missing payments at all costs. Even missing a single payment can have a serious negative impact on your credit score, and even if you end up repaying your debt, that blemish can remain for good amount of time.
So make sure that you remember to pay all of your bills on time – make a list of each debt you have, how much you owe, and when it’s due. By following this list, you can ensure that you stay on top of your finances, and don’t have to worry about missing any scheduled repayments.
4. Applying For Too Many Auto Loans At Once
If you’re shopping for a used car, you may have gone to multiple banks in order to get pre-approved for an auto loan, and ensure that you’ll be able to get a good rate on your car.
However, applying for too many auto loans or other lines of credit at once can actually damage your credit score. Each bank will record your inquiry, and if your credit report shows multiple inquiries in a period of more than a week or two, your credit can be negatively affected.
This can be avoided by applying for auto loans within a shorter window of time. If you apply for multiple loans within a week or so, the inquiries won’t be treated separately, so your credit won’t be negatively affected.
5. Maxing Out Credit Cards
If you have a large number of credit cards with a high balance, your score is going to be negatively affected.
This is because of what’s known as the “credit-debt utilization ratio”. Here’s an example: if you have a credit card with a $5000 limit and you only have a $1000 balance, your credit utilization ratio will be 20% – which is totally fine.
However, if you have a balance of $4500 on that same card, your credit utilization ratio is 90% – which signals risk to lenders. High balances on multiple credit cards show that you’re living beyond your means, and that you may not be able to repay a large loan such as an auto loan.
So avoid maxing out your credit cards. Instead, take on small amounts of debt and pay the entire balance of your card monthly – doing so will keep your credit-debt utilization ratio low, and help you build up your credit score.
Got Bad Credit In Canada? Shopping For A Used Car? Come To Ride Time Now!
If you have bad credit, shopping for a used car can be a real pain. But at Ride Time, we specialize in serving Canadians who have bad credit.
We understand that it’s easy to make mistakes when it comes to your credit – and we think that everyone deserves reliable, safe transportation.
If you can provide us with proof of 3 months of employment, take-home pay of $1,500/month before deductions, and a valid Canadian driver’s licence, we’ll work with our group of 15+ specialized lenders to get you a great rate on your auto loan – no matter how bad your credit may be!
So don’t let these common credit mistakes stop you from getting a great used car. Come to Ride Time today, and we’ll help you find a fantastic car – even if you have bad credit!
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