How is Credit Score Calculated in Canada?

How is Credit Score Calculated in Canada?

Have you ever wondered how a credit score is calculated? And why does a credit score matter so much when applying for new credit? You may or may have thought about it. But no matter the reason, the credit score does play an important role while applying for a new line of credit.

Canada has one of the highest financially literate people in the whole world. With over 61% financially literate people. But just by being financially literate doesn’t guarantee that you won’t make a bad financial decision. It is natural and happens to many people.

Sometimes, a bad financial decision can severely affect the credit score and results in a lower credit score. For example, even though you had a genuine reason, your creditors are concerned, leading to a poor credit score. Moreover, it can take up to 18 months or more to improve your credit score.

In the meantime, if you encounter a difficult time, getting a loan can be difficult. Even if you find a lender ready to provide you with a loan, they’ll charge a higher interest rate on the amount. So, bad credit can lead to a lot of problems.

But, of course, you can apply with an online loan lender with an online loan application in Canada. In this article, we’ll have a deeper look at credit score and how it is calculated in Canada.

What is a credit score?

A credit score or FICO score is a three-digit number that is assigned to individuals who have an active credit history. These numbers range from 300 to 750 or 800. The higher your score is, the better your chances of getting a good loan.

The credit scoring system is a unified system that impartially assigns a credit score to people. This system was created to make a unified way to check the creditworthiness of a person. However, it showed many flaws and problems over time, but it is still used worldwide to assess a borrower’s credibility.

How is credit score calculated?

There are three major credit bureaus in Canada – Equifax, Transunion and Experian- that records every person’s credit and manage their credit history. Majorly they see the following five factors while giving a credit score to a person.

  1. Payment history
  • Payment history is the most important of all. It makes up 35% of your total credit score. This accounts for all the late payments, timely payments and defaults. So, if you make timely payments, you will have a good credit score. It is as simple as that.
  • But what will happen if you have a bad payment history? The opposite! If you fail to make the payment on time, you will have 30 days time period to pay that amount.
  • If you couldn’t pay in that time, your creditor will inform the credit bureau, which will be recorded in your credit history, which will affect your credit score and cause it to fall.
  • In the case of default, you will straight away lose 250 points. And that will be a significant drop in your credit score.
  • So, to keep your credit score in good shape, ensure you pay on time, don’t delay any repayments and obviously do not default on payments.
  1. Credit usage
  • The second most important part of your credit score is credit usage, which accounts for 30% of your overall credit score.
  • This includes the number of accounts you have, how much credit you have used and how much you owe.
  • If you have a higher credit usage in multiple accounts, your score will lose points, whereas only spending small parts of credit will improve your credit score over time.
  • Similarly, if you have applied for new credit, it may temporarily lower your credit score, but if you continuously pay on time and reach the end of your credit duration, it will increase because you will have created a good payment history for that loan.
  1. Credit history
  • After the payment history and credit usage, the third most important factor is credit history. The longer you have a credit history of timely payments, the better your credit score. This is why it is advised to keep your credit line open.
  • If a lender opens your credit file and has no credit history to check, it would greatly affect your credit score. If you are beginning to build your credit history, it will take nearly 18 months to build a decent credit history.
  • So ensure you are making timely payments, build a good credit history, and avoid any defaults on payments. Moreover, a default can take up to 6 years to disappear from your credit history. So, you should try avoiding getting one.
  1. Types of credit

  • The next is the type of credit line you own. Having multiple credit lines will help you build a great credit history and, over time, will result in a great credit score.
  • Different credit lines include credit cards, home loans, car loans, personal loans or any other type of loan. These loans have different loan applications in Canada, which you can apply through a bank or other financial institution.
  • Once you get a new credit line, ensure you make timely payments and use them effectively to keep them active and continuously build credit history.
  1. Hard and soft inquiries
  • Finally, hard and soft inquiries account for 10% of your credit score. These entries are done to check your credit score and credit history.
  • Soft inquiries are all those inquiries that you make. These entries are not recorded in your credit history. Soft inquiries are inquiries made by you. For example, checking your credit score.
  • On the other hand, a hard inquiry is recorded on your credit history. A hard inquiry can often lead to a slight drop in your credit score, which is fixed over time with timely payments.
  • A hard inquiry occurs when you apply for a new credit line, such as a home loan or credit card. The institution you are applying with makes a hard entry to check your credit history and analyze your credibility.

A credit score can be a detrimental factor in getting a loan. However, sometimes, with a bad credit score, you can get a loan but at a higher interest rate. So, you can also apply with online loan lenders, such as PrestoCash, to apply for an online loan. In addition, our online loan application in Canada helps you receive loans while you are on your way to improving your credit history.

8 Tips to Talk About Money With Your Significant Other

8 Tips to Talk About Money With Your Significant Other

Finances, money, income, taxes, offline and online loans in Canada are all important parts of life, and beginning the second part of life with your significant other comes with several responsibilities. We understand love is the foundation of a relationship.

However, it’s not enough to sustain a relationship. When two people decide to share their lives together, they are also bound by their responsibilities. Sharing ups and downs, workload, and managing finances. They all are crucial factors in sustaining and thriving a relationship.

Often, people feel uneasy talking about money. If you are dating someone and plan to settle with them, having a financial conversation with them early on and relaying your financial expectations are essential for your future.

When checking stats and data for the leading reason for divorces in Canada, money matter tops the chart. This is why financial matters are much more important than any other thing in a marriage. However, opening up about finances can be difficult, especially if you or your partner have pessimistic views on money.

So, to help you and your partner open up about money, we have compiled a list of ideas and ways through which you can talk about money with your significant other without turning it into an awkward conversation.

Tips to talk about money

  1. Start slowly
  • Often people who don’t know how to talk about money ask ridiculous questions that can upset the mood of the conversation.
  • For example, you should never ask how much you earn directly. Human psychology attaches this question directly to their self-worth. As a result, many people are uncomfortable opening up about their income. Therefore, do not start with this question. Instead, you can ask their views on money or how important they think finance is.
  • And as you talk about money, don’t just keep asking. Instead, explain to them how you deal with financial matters and what kind of relationship you have with money. So, start slowly, and as you get comfortable talking about such matters, you can ask more specific questions.
  1. Ask open-ended questions
  • Questions are a great way to know about other people. And if framed appropriately, it can help you get everything out of a person.
  • So, while on a dinner date, ask broad and open-ended questions. For example, do you know about credit, and what ideas do you hold about them?
  • A question like this is neither too personal nor too explanative. Moreover, these are also a great way to open up about their money beliefs and ideologies.
  1. Share your ideas on money

  • Tell your partner about your money beliefs and ideals. Layout your plans and expectations related to money. This will help your partner learn about money and understand your ideals.
  • It is a great way to relay your beliefs on money and share your financial expectations. The more you talk about money, the more comfortable you will get with each other.
  1. Ask about their upbringing
  • The way they view money is the product of their environment. For example, a person brought up in an environment where talking about money is nothing special develops the mentality that having a conversation on money is normal, which later also helps in conversing with them about money easily.
  • However, if a person is brought up in an environment where talking about money is treated as a taboo, that person will grow up avoiding money conversations. So knowing how a person is brought up can help you frame the right questions for them.
  1. Have a clear goal for the conversation
  • People often jump into conversations believing they’ll know what to talk about. Well, unless you are a super extrovert, things don’t always go like that.
  • Having a conversation goal will help you know what exactly you want to get out of that conversation. For example, maybe you want to know what they think about money or how they plan to finance for the future.
  • This is also a great way to skip the small talk because small talks are the least interesting and have grown up as we grow old. Moreover, it will also help your partner gain clarity on what they want.
  1. Create money goals together
  • Creating money goals is super important and a great way to have a secure future together. Love is a great commitment, but it won’t feed you.
  • So, planning financial goals together will help you support and finance a bigger goal. As both of you will be involved in reaching the milestone, staying disciplined with finances will become easier.
  1. Set clear intentions
  • We are no longer living in a world where women are bound to home and men are bound to offices. Many women can work, and men can stay at home to take care of children.
  • So, while discussing finances, confront them about your expectations and what you want from them.
  • Are you okay with them working or want them to stay at home? Whatever it may be, setting clear intentions will help you avoid future disputes.
  1. Combine finances
  • After the marriage, you need to combine your finances, so sorting and planning how you will merge finances and work everything out is an important part of a successful marriage. But unfortunately, having the same level of financial literacy is not possible.
  • So, don’t belittle your spouse if they ever make wrong financial decisions. Instead, help them learn from their mistakes because from now on, you two have to stick together in every up and down in life.
  1. Keep an open mind
  • Finally, keep an open mind while having a conversation related to finances. You cannot expect your partner to be on the same level as you.
  • And just because your partner has low financial intelligence than you doesn’t mean you can enforce your decisions on them.
  • Nevertheless, pay heed to their opinions, and if they make any nonsensical remarks, don’t brush them away. Instead, help them learn why their ideas can be bad for them.

The above-mentioned tips are meant to help you talk openly about your finances with your spouse or partner and have a clear understanding of each other finances, beliefs, and ideas.

So, whether you are looking for a new home or planning to apply for an online loan in Canada, conversing with your partner and making planned decisions in your life will ensure that you and your partner make the right financial decisions in your life.

A Guide to Using Credit Cards with the Right Way

A Guide to Using Credit Cards with the Right Way

Have you ever heard people say, don’t get a credit card, you will pile a mountain of debt on your head? Well, the irony of this situation is those people who are telling you not to get a credit card, don’t own or have never ever used a credit card. They are simply passing what they hear according to their beliefs.

Of course, we are not here to change someone’s belief, and the one who is least interested in credit cards wouldn’t be reading this. So, if you are here and reading this post, congrats! However, you are different from the rest of the people who do not take time to learn about credit cards, same-day e-transfer Loan in Canada, and other credit instruments and use them as they see fit (which is the wrong way to use them) and often falling into a debt trap.

So, in this article, we will discuss everything about credit cards and things you should know about them before actually getting one.

What is a credit card?

A credit card is similar to a debit card. The difference is that a debit card uses the money you have in your bank account, whereas a credit card uses the money that your lending partner provides you.

This is the prime difference between credit and debit cards. However, if you ask which one is better, then let me tell you, every rich person on this earth uses a credit card and a debit card.

You would never hear a financially knowledgeable person say that a credit card is bad for your finances because this is far from the truth. However, another truth is that people fall into a debt trap by using a credit cards.

What is a debt trap?

A debt trap can be explained in various ways, but to keep it simple and short, a debt trap means you are pilling loans over loans on your head by paying a little amount to settle the bill for the time being. And this is also a major blunder people make by owning credit cards (we’ll talk about this later).

Let’s understand the debt trap through an example:

John makes $5000 a month, and his monthly expenses go $3000. He makes the payment using a credit card. At the end of the billing cycle, John pays a minimum amount of $500 to settle his bill for the time being. Little did he know the remaining amount would start incurring interest. An average credit card charges a 19% interest rate on the outstanding amount in a year.

The remaining $2500 will be carried forward and added to the next month’s bill. And if John spent $2000 on the next month, the total bill will be $4500. Even this time, the credit card company will offer him to make a minimum payment of $600 and pay the remaining bill later.

 The credit will pile up on the initial amount by continuing the same cycle. Before he realizes John is already under a debt that is more than his monthly paycheck and is incurring interest of 19% pa. This is a debt trap where John has to pay most for the debt he owes and pay more in the interest. However, John may take the e-transfer Loan in Canada to pay his credit card bill, but he still has to adjust the loan monthly or weekly budget.

The right way to use a credit card

If you don’t want to fall into a debt trap, here is the right way to use a credit card.

  • Get a free credit card
    If you are applying for a credit card for the first time. Apply only for a free credit card. For starters, building a credit score and a good credit history is more important. Surely, paid cards offer much more benefits, but you don’t need those, so get a free credit card.
  • Set a 30% limit
    When you receive your credit card, you will have a higher credit usage limit than your monthly salary. But don’t be mesmerized. One of the major drawbacks of using a credit card to its fullest limit is that it negatively impacts your credit score. In addition, by using the full amount of the credit, the lender may generate doubt that you may or may not be able to pay the bill. So always keep your credit card spending within 30% of the total amount.
  • Always pay in full
    When you receive your bill at the end of the month, don’t only pay the minimum amount. Instead, pay the full amount. This will stop the pending amount from incurring charges and save your money that would otherwise go towards paying interest.

How not to use a credit card?

After learning how to use credit cards the right way, it is also important to learn about the wrong ways to use credit cards to avoid them.

  • Do not overspend
    When you have a credit card and see the amazing spending limit you have, you feel as if you can buy anything. But that’s a false dream. You have to realize that the credit limit is not the real money you have but the money you can owe. So, do not get overwhelmed with feelings and end up spending more than you have.
  • Do not forget to track expenses
    The institution that provides you with a credit card also provides a way to track all the transactions you made. Therefore, keep a weekly or daily check on the spending to keep it within your budget. Moreover, for good financial life, you need to track your expenses and keep them in check.
  • Do not close your credit line
    One major fault people make is they close their credit lines. You may have had a bad experience with that credit card, but closing the card is not a good idea. You can reduce its usage. Closing a credit line will remove all the history linked to that credit line, drastically impacting your credit history.

In the end, credit cards are a great way to build a credit score and improve your relationship with money. So, while learning about credit, you can also take a same-day e-transfer loan in Canada to understand how loans and credit cards are different and better understand their functions.

How are Online Loans Better than Traditional Bank Loans?

How are Online Loans Better than Traditional Bank Loans?

Securing a loan is not as easy as you think. You have to wait in ques for a long time and follow up on several procedures to apply for a loan in a traditional bank.

However, sometimes you may require instant funds to help you get through a difficult financial circumstance. However, if you plan on acquiring a loan from a traditional bank, it will take a long time. Despite this, the bank may reject your application if you don’t have a good or decent credit score.

If you need funds to cover a financial emergency, then consider applying for online instant cash loans in Canada. It’s the greatest option if you need money right away without any long procedures or several documents approval.

What are online loans?

PrestoCash

Online loans are financial weapons that have the ability to get you out of any short-term financial crisis. These loans are simple to obtain and are offered by practically all major lenders in Canada.

Whether it’s organizing cash for your royal wedding, purchasing a new vehicle, going on a vacation with your friends, or for any financial reason, an instant online loan is always helpful. Also, you don’t need to save up little installments to get your favorite product because these loans can cover all of your expenses.

The best part about online loans is that they have low-interest rates and easy repayment options. In addition, you can easily cover your loan amount with small monthly installments in a tenure of 6-12 months.

Several online lenders in Canada offer instant cash loans with different terms and conditions. You have to choose the best one according to your need and requirements. Also, see their customer histories and customer reviews for the best results.

What is the difference between an online loan and a traditional one?

PrestoCash

In today’s world, traditional banks are also enhancing their services and making them more convenient. But there are several points that make online loans far more suitable option than traditional loans:

1. No personal contact:

Have you ever waited in long queues to apply for a loan in traditional banks? Was it frustrating and took your whole bank following up on several procedures with your loan manager? Of course, it is frustrating taking a loan from a traditional bank. You have to wait for days and make several visits to your loan manager to apply for the loan.

Online loans, on the other hand, do not have several personal meetings or long procedures to secure a loan. People don’t even have to step out of their homes to secure a loan as their whole process works digitally. You just need a smartphone and internet to apply for an online loan. The money will be transferred directly to your bank account within a few hours of applying. This is one of the best reasons why online loans are better than traditional bank loans.

2. Quick application process:

If you face any financial or medical emergency, then you need funds right away. In such situations, you cannot apply for a loan in traditional banks and wait for days to get it. Also, you will never be sure in a traditional bank loan that you get the money soon without any inconvenience.

The other reason why online loans are better than traditional ones is that they have a faster application process. And you get the funds within hours or the same day of application. To apply for an online loan, you just need to visit the lender’s website, select the type of loan you need and fill out the loan application form. The lender will take a few minutes to review it. And if the lender finds you eligible for the loan, they’ll transfer the funds directly into your bank account.

3. No credit check:

If you have a low or bad credit score, you cannot get a loan easily in a traditional bank. You have to make extra visits to the bank manager, pay high-interest rates and agree to different conditions to apply for it.

Online loans do not have such difficulties. They don’t bother if you have a bad or high credit score. Online loans offer several bad credit loans that you can apply for at their site. To assess your credibility, they check your income details and other cash details instead of your credit score. If you have a:

  • a regular job
  • constant cash flow in your account
  • Canadian citizenship
  • And you’re 18+

Then you can easily apply for Fast e-transfer loans in Canada. Also, they offer lower interest rates and easy repayment options. That’s why they are far better than traditional loans.

4. No restrictions:

When you apply for a loan in a traditional bank, you’ll have to apply for it for a particular reason, and you cannot use that money on anything else. For example, if you’re taking a loan for home repair or renovation, then you can only use the funds for that purpose. You cannot use the loan amount on anything else.

Online loans, on the other hand, have no restrictions on how you use the money you borrow. You can spend the money on anything you desire. For example, you can plan a trip with your friends, use these loans amount for car repairs, or any other way your requirements demand. The lender has no interest in knowing where you’re spending the money you borrow.

Online loans are always better and far more convenient than traditional loans. With these loans, you don’t have to wait for a long time to cover your financial expenses or buy a new gift for yourself or your loved ones or for anything other reason.

Instead, you can apply for it at any time from the comfort of your home or office. These online loans are the best alternatives to cover your financial or medical emergencies. If you need funds instantly, visit our site, apply for online e-transfer loans in Canada, and get money as quickly as possible.