Credit In Canada 101
In this section, we will briefly explain what credit is, why and how it matters, the overall classification, types, benefits, features, cons, pros, and everything else you need to know to get on top of your credit game.
The key to understanding all there is about credit is to start from the beginning. Having a good credit score requires responsible behavior and a certain level of financial savviness. If you keep an excellent credit score, you can rest assured that there is a wide range of benefits in store for you.
So, let’s start with what credit is and how keeping an excellent credit score benefits you. When you want to take credit, you go to either a bank or a credit lender. Credit is like an agreement you make with these financial institutions.
Borrowing a credit means that you’re borrowing an amount to achieve a certain financial goal and pay for it later. People take credit to buy a house, car, home improvement projects, start a business, etc. If you don’t have money to buy something you need in the near future, one of the best ways to make it happen is by applying for credit.
What Is Credit?
The agreement you make with a credit lender allows you to use the means you don’t have and pay for them later, at the agreed terms and conditions. The arrangement also determines the way and timing of paying for your credit.
Now, the key to understanding credit in full lies in understanding your credit score. It’s pretty much what defines the quality of your life today. Your credit score is like your official record. Businesses, employers, and credit lenders can access your credit score to assess if you’re eligible for their services.
It allows them to see how responsible you are as a consumer and how well you manage your loan payments, bills, debt, etc. Based on your financial responsibility, behavior and spending habits, and your performance, you get rated by the credit bureau.
This rating affects literally every aspect of your private and professional life. Therefore, understanding all things associated with credit should be one of the essential things to worry about in your life.
Your credit score tells your new employer whether you’re trustworthy or not. If you want to establish a new relationship with a business partner, they will address your credit score to see if you’re reliable enough.
In terms of getting a loan, an excellent credit score allows you to tap into low-interest rate loans. However, if your credit score is bad, you’ll be looking at much higher rates, as well as the possibility of not getting approved for a loan at all.