Credit Score FAQS
How is my credit score calculated?
Your credit score is a number that ranges from 300 to 900; the higher the number, the better the score. In Canada there are two major credit reporting agencies: Equifax, and TransUnion. Each month companies that issue credit report to one (or usually both) of these agencies, creating what most people call, a credit bureau. They report the amount outstanding on all accounts, anytime that credit is obtained or sought, if you are late on a payment, or you do not pay at all. All of these factors weigh into your score, and affect your ability to obtain new credit.
Equifax & Transunion generate a score based on the information that was submitted to them. Here are some examples of what creditors look at before making a credit decision:
• The timelines of your payments, including any missed payments
• The amount of debt that you have (Credit Utilization)
• The type of debt you have (Installment vs. Revolving)
• The age of your credit accounts (old credit vs. newly obtained credit)
• The number of inquiries created by applying for credit
• Any Collections and/or Judgments
Sometimes this term can be confused. Where many dealerships offer financing at their store, In-house financing refers specifically to borrowing money from their store. This is typically the most expensive option possible for a client, often taking collateral in items beyond just your car, and charging exorbitantly high interest rates. Not to mention rarely reporting to either of the credit bureaus - meaning your good payment history does not build your credit score, and you're kept stuck on their treadmill forever. Avoid this option at all costs!
By using ALC for your loan, your financing will be arranged through one of our large number of partnered financial institutions. These range from chartered banks and credit unions you'll already know, through to specialty automotive lenders, and credit builders/rebuilders; all of whom are regulated, and all of whom report to the credit bureaus. You'll be making the payments anyway, make sure to use it to your advantage by financing with ALC.
**It is important to note, most dealerships that offer in-house financing, will only report poor repayment history to EQUIFAX or TRANSUNION (not good repayment history). A vehicle loan is one of the best ways to build your credit, don't make the mistake of choosing the wrong lender. ALC will help connect you with a solution that also benefits you! **
Financing vehicles in Bankruptcy
Years ago declaring bankruptcy or going through a consumer proposal, meant that you would be financially ruined. However, in today’s economy banks and lenders understand that sometimes choosing bankruptcy is necessary.
Today, it is possible to arrange financing for clients who are completing or have already completed a bankruptcy or proposal. In fact, sometimes having the slate "wiped clean" means you are now a lower risk than you were before the bankruptcy began. An automobile or RV loan can often be one of the best ways to show lenders you are back on track, and capable of managing a regular installment payment without issue. Submit your application today to find out your eligibility for a fresh start!
How to Build Credit?
There is a common misconception that someone's credit score is based on their payment history. Did you know that this isn't entirely true?
A history is well... history. It cannot be changed. But the good news is your past payment bumps makeup only a minority of your overall Equifax or TransUnion rating. Keep reading for some lifehacks on how to quickly and easily improve your score and attractiveness to lenders:
• Reduce the amount owing on your revolving accounts (credit cards, store cards, and lines of credit). Pay them down, do not close them.
• Have one revolving account with a low balance, and one with a high balance? Move some money around. Your goal should be to make each revolving account's credit utilization (balance relative to limit) as low as possible.
• Have your credit limits increased. Remember our talk about credit utilization? If your balance owing is $500, and your credit limit is $500, then your credit utilization is 100%; this is considered high-risk for a lender. Let's say instead you owe the same $500 but your credit limit is $1000, now your credit utilization is only 50%; this will result in a drastically lower risk profile to a lender.
• Minimize new credit inquiries. The credit reporting agencies do expect a client will often shop multiple options when making a major purchase, they understand this reality and their scoring model accounts for it. A number of requests for credit in a short period of time? Very little to no lasting effect on your score. However a large number of requests stretched over a period of months (or even years)? That will weigh on your score for a long time.
Moral of the story is: Be selective. Choose someone who is experienced and knowledgeable, someone who will work to protect your credit, someone who will minimize inquiries, and give you flexible options. Yup you guessed it, that person is us!
If you’ve recently immigrated to Canada, welcome! You've come to the right place. We have numerous lenders that work with people just like you each and every day. In fact, many financial institutions have become so aware of the value you bring, they've gone as far as to build quick-start programs tailored especially for those with little or no established credit yet in our country. Eligible applicants include individuals with employment and student visas, as well as permanent residency.
To be considered for financing all you need to do is apply and let us help you with the rest.