Credit is something that is, for the most part, very difficult to control. It’s nearly impossible to truly finesse your credit score into being anything in particular. So many different variables collide when evaluating one’s credit score that it can often be surprising how good or bad your credit has become.
Between rent payments, bills, credit cards, and loans, it’s as easy to lose credit as it is to build it. A bad credit score can feel like the final nail in the coffin, a fiscal death sentence. But for some reason, there are still commercials all over television of local and national lenders proclaiming in front of a wacky inflatable flailing arm tube man, “Bad credit, no credit, no problem”. It can seem almost too good to really be true.
Do these lenders really not care about their applicant’s credit score? If so, why? Well in some cases, it is true! In fact, Ridetime works with several lenders who can almost guarantee approval for any customer, with a valid Canadian driver’s license, who makes at least $1500 a month. So grab some popcorn and rub that sleep out of your peepers, because we’re about to get started.
A credit or FICO score evaluates the relative risk or security, a lender would have when making out a loan to someone. It synthesizes a bevy of information about your financial past, and then concocts a somewhat arbitrary number intended to reflect your security or concern as a loan recipient.
A variety of seemingly insignificant factors can contribute to your credit’s downfall. Maybe you just had to have that new maple syrup scented hockey puck, but couldn’t pay it off on time. Maybe you put that new Moose-drawn toboggan on a low balance card, accidentally overdrafting your account. Maybe you’re an American blog writer trying desperately to relate to a Canadian audience without knowing much about the kinds of things they purchase. The point is, we’ve all got problems!
But bad credit doesn’t always spell disaster when it comes to securing, for example, an auto loan. In fact, around 82% of the Canadian used car industry’s sales in 2015 were made possible by auto loans. Interestingly, roughly 40% of Canadians have below average or bad credit, yet auto loan approval rates continue to rise. This indicates that despite a general decline in Canadian credit, the Canadian used car industry is still consistently approving auto loans. When it comes to something like an auto loan, lenders put a lot of stock in something called collateral.
Collateral, essentially, refers to an asset owned by the person receiving the loan, that if necessary lenders can collect to pay off the remainder of the debt. Collateral is a very important factor in auto loan lending decisions because lenders will often view the car itself as a sort of collateral. If the person receiving the loan weren’t able to pay off the debt, the lender would be able to claim ownership of the car and use that to settle the debt. So, one’s credit score isn’t as big of a factor in this sort of lending situation, as the object of the loan itself could be used to pay it off. Therefore, auto loan lenders are more likely to extend credit to someone with a lower score, because they will always have the option to recoup by seizing the vehicle itself. Loans made with collateral, also known as secure loans, are a great way for people with bad credit to get the auto loan they need to ride off in the car of their dreams.
Now finally comes the most critical observation of this piece. Why? Why do lenders still give loans out to people with bad credit. The answer is really quite simple. It’s because they are in the business of making loans, not denying them. It’s true that they want to feel secure when making their decisions, but truthfully, they need to say yes in order to make any money. So, if you can put up some sort of collateral and prove that you’re capable of paying your debts consistently, you’ll likely receive the loan you’ve dreamed of.
One of the most appealing aspects of Ridetime’s services is our comprehensive network of lenders. We work with a wide variety of lenders, with a wide variety of approval policies, to find an institution that wants to work with you.