≡ Menu

What Constitutes Good Credit?

shutterstock_114096769

Having good credit can go a long way in securing the loan or rate you want when purchasing a new or pre-owned vehicle. It is important to know about what constitutes good credit, and how to build towards establishing and maintaining it.

A Credit rating reflects the current payment status of an account. The rating is not linear, rather it describes the current payment status:

Rating Description

0 Account exists, but there is no recent activity to be rated
1 Account is “Paid as agreed and up to date”. This is the “best” rating
2 – 5 Account payment is overdue (how long overdue will determine the exact rating)
7 Payments are being made through a third-party program
8 Repossession or foreclosure of collateral
9 Bad debt – account is in collections

Credit scores are calculated by converting information on your credit report to a number based on a formula which assists creditors in determining your credit risk compared to others.

Credit Score Factors:

  • Payment history (Credit ratings)
  • Credit consumed – Staying under 30 percent of your available credit induces a higher credit score
  • Negative information found on public record, such as bankruptcies or collections, can lower a credit score

If you have had credit issues in the past, there is important information to consider about the process of restoring your credit rating:

  • Any accounts in collection will show up on your credit report for six years from the date of last activity
  • If possible, start repayment on any accounts in collections
  • Consider applying for a secured credit card to help you in rebuilding your credit rating
  • Credit Canada Debt Solutions can help you rebuild your credit rating

The following habits are good to know for maintaining a good credit score:

  • Review your Credit Reports at least once a year
  • If you find incorrect information on your Credit Reports, contact Equifax or TransUnion so that they can begin the dispute resolution process
  • Pay all bills on time
  • Do not apply for too much new credit in a short period of time
  • Do not bounce cheques

Knowing what constitutes your credit ratings and credit score, and what you can do to improve or maintain is crucial to having good credit. For more information, contact Sherwood Dodge in Edmonton, Alberta to learn more about how the Sherwood Dodge Financing Team deals with all types of credit situations!

Financing Team
Sherwood Dodge

{ 0 comments… add one }

Leave a Comment