Your Credit Rating and Your Chances of Getting Approved for Loans

Every person who has applied for a loan or credit card will have a credit report. The credit report will show your credit history--how often you made payments, how much you paid, and many more. From the credit report, your credit rating will be computed.

Credit rating

Credit ratings are determined by a lot of factors such as payment history, control of debt, utilization, re-aging, and others. In Canada, the North American Standard Account Ratings are used. The “R” ratings range from R0 to R9. R0 means new account, while R1 means payments are made within 30 days of due date. R2 means payments are made in more than 30 days from due date; R5 means account is at least 120 days overdue. R7 means payments are made through a special arrangement in debt settlement. While R8 means repossession, R9 means bad debt.

The credit rating is regularly updated. Lenders regularly send your financial information to credit reporting agencies such as Equifax and TransUnion. You can also contact these companies to request for your credit report.

Loan application and approval

Whenever you apply for a loan, you will be requested to submit your credit report as part of the pre-qualifying stage. The lender will use your credit report and score to see how your finances are.

If you have a credit score of R8 or R9, that means your loan is very unlikely to get approved. But if your credit score is R1 or R2, it is very likely that your loan will be approved. No lender will easily lend money to someone who has bad credit, right?

Maintaining a good credit score will ensure that your loans will get approved. Not only that, you will also get lower interest rates and be deemed responsible even by employers.

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