Here in Canada we use equifax or Trans Union as the main credit reporting agencies. A credit score is the sum of the activities on your credit report or credit bureau. It is a breakdown of your credit report performance usually in the last 7 years. The activity on your report is what determines your credit score. Your credit lenders report to the credit bureau the month to month activities, on how well you are meeting your monthly obligations. How you are paying back a revolving credit (credit cards) or installment loan(s) will determine your score. Other factors are collections, judgement, bankruptcy or family maintenance reporting to the credit bureau. But the most common of all are the monthly obligations.
Late Payments And Your Credit Score
Having seen so many credit bureaus over the years, some people don’t realize the importance of making your payments on time as agreed. This oversight is very common. Some seem to think the late part of a payment doesn’t matter as long as they are making the payments. Making your payments outside of that time frame will actually hurting their credit and lower their credit score. This would often be referred to as a “slow payer”. Making late payments may keep the collections department at bay but this will report on your credit bureau and reflect directly on your credit score. Making the minimum payment on time is better than a late payment. A late payment pattern, if consistent will affect your future chances of qualifying for a new credit or a higher credit limit and will ultimately give you a lower credit score.
When shopping for a bad credit auto loan, you may still qualify however, the first thing this will affect is the interest rate.
Improving Your Credit Score
To preserve a good credit score will require a close eye on your credit bureau. Some people don’t have any idea that there is a collection action on their credit bureau. For this reason, do not give out or lend your credit to anyone. Try not to be a shopper and refrain from getting too many credit inquires on your bureau. Avoid applying for more credit. Be selective on who you give your credit information to. Limit yourself to a maximum of two credit cards if possible, keeping your balances low or none existent. Make your monthly payments on revolving or installment loans on time. This is where a lender can see a clear pattern when reviewing your credit report. The credit score and the behavior they see on your credit report is the behavior they will assume you have if you were to be granted more credit.