Freedom Credit Repair is a free, informational resource for Albertans looking to improve their financial health. If you have less than perfect credit and are looking to change it, read on!

First things first: What ‘is’ your credit score?

When you apply for a loan, the first information that your lender will check is your credit score. Credit score is a numerical measure of your economic health and your financial capability. It indicates whether you are good at managing your finances or not.

The criteria used in computing your credit score are:

  • your payment history
  • your outstanding debts
  • your account history.

The computation and monitoring of credit scores are performed by credit report agencies like Equifax,  TransUnion, and Northern Credit Bureaus Inc.

Advantages of having a good Credit Score

Simply put, it is easier to be approved of a loan application if you have a good credit score. Because you have a reputation for being a responsible borrower, more lenders will be willing to lend you their money. Your good credit score, for some lenders, is enough evidence that you are capable of paying back your debt even before the payment term ends.

Another advantage of having a good credit score is that you can easily talk your way into getting a low interest rate. Convincing your lender to lower the interest rates of your loan is not that difficult if you can prove that you can repay your debt on time.

Besides, how can a lender say “no” to a person with an impressive credit history like yours?

Disadvantages of having a bad Credit Score

One of the implications of having a bad credit score is that you are not a responsible payer. Because of this new-found reputation, you will have a more difficult time in applying for loans or mortgages. To protect their financial interests, lenders will most likely reject your loan applications instead of approving them. Doing business with financially incapable individuals, after all, is always a big risk.

Having a bad credit score doesn’t mean that you have absolutely no chances of finding a lender. In fact, some lenders are still willing to lend money to people with bad credit scores. Here’s the catch though: to counter the risk of lending money to a person with a bad credit score, lenders will charge you with higher interest rates.