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Learning How Credit Works—Empower Yourself With Knowledge

il y a 7 mois

Credit reports and scores are an important part of life as a consumer in the modern world. Whether you consent to it or not, there are two independent credit bureaus in Canada that collect credit history information on how you use credit, how much debt you have built up, and whether you make credit monthly payments on time. The result is a two-part grading system, both a numerical score and a long-form report, which provides detailed information on how you behave with credit. If you’ve ever fallen on hard times, this can spell disaster for your financial future no credit card or bank is going to look at your situation favorably to offer personal credit. Luckily, you aren’t alone, and you aren’t out of options, either.

 

How Does Credit Work in Canada?

 

The modern credit reporting system originated in the United States as a way of allowing financial institutions to determine whether they wanted to do business with a consumer or not. That sounds like a basic and understandable thing—you wouldn’t loan money to a total stranger sight unseen, would you? Unfortunately, under the auspices of the independent credit bureaus, credit data collection has become something of a runaway train.

 

You don’t get to opt in or out of the credit system. If you borrow money from any financial institution, whether it’s auto loan or a credit card, you automatically start getting tracked by a credit bureau to see if you make those repayments or go over your credit limit. Even if your bank balance is OK now, your credit history can still go against you. As of 2017, there are two credit bureaus operating in Canada: Equifax and TransUnion. These are international companies that crack consumer credit and debt in multiple countries, but your Canadian credit report and score are only applicable in Canada.

 

That’s because different national governments have different laws governing how the credit bureaus are allowed to behave. Canada’s system is relatively consumer friendly, with a good amount of government information and assistance available to those who are in the credit system.

 

Your credit report and score are not fully public information, but a wide range of  businesses and individuals are allowed to check your credit as a way of verifying whether you’re trustworthy or not. When you apply for a job or try to rent a new apartment, your prospective new boss or landlord may ask to check your credit score. Banks, insurance companies, mobile service providers and even government agencies can also take a look at your credit score, but you usually have to give permission first. Declining to give permission can look quite suspicious, which isn’t exactly fair.

 

Your credit report will show all the missed payments, bad cheques and other painful moments from your financial history. This information is summed up with a numerical score ranging from 300-900. Those with no credit history to speak of start at 300 and can work their way up to the highest score of 900 by using the system just right (i.e., always making on-time payments, having more credit available than used, having different types of credit and demonstrating competence over a long period of time). The good credit/bad credit threshold falls at 650—if your score is below this number, lenders will generally look at you with skepticism. If you’re higher than that, you’ll be seen more favorably.

 

These perceptions enhance incrementally the higher or lower you go. A credit score of 400, for example, will generally be seen less favorably than a credit score of 630. If your score is below 650 even by a few points, though, most lenders won’t take you seriously as an applicant. That’s where bad credit car loans and other special financing options come into play for people who’ve fallen on hard times.

 

Factors That Can Affect Credit Without Your Knowledge

 

In September 2017, it was announced that Equifax, one of Canada’s two credit bureaus, experienced a widespread hack that exposed the financial details of several hundred million customers in Canada, the UK, and the USA. The hack mostly targeted Americans, but the fact that it happened at all, and the fact that Equifax’s response was pretty lackluster and incompetent overall, shows just how risky the credit system can be for those who are entered into it.

 

 Why does this hack matter? Well, when a criminal gains access to your personal identifying information, they can then open up credit accounts in your name. The goal here is to steal money, not to build your credit up and make your financial life healthier. Identity theft and identity fraud can absolutely destroy your credit because the people who open up lines of credit in your name aren’t going to pay the bills on time (or at all).

 

That’s why it’s so important for you to check your credit report on a regular basis. Yes, it can be painful to do this if you’ve been through a rough patch and it shows in your financial history. But not monitoring your credit can make things worse. You can request a free copy of your credit report from both Equifax and TransUnion. Equifax refers to this document as your “credit file disclosure,” while TransUnion calls it a “consumer disclosure.”

 

You’ll want to look at both reports once a year to make sure there’s no fraud detected on the account. The Financial Consumer Agency of Canada recommends alternating between reports from each bureau every six months. This way you can check your reports from the different bureaus once a year but still stay informed on a semiannual basis.

 

If you do see some suspicious activity on your credit report, you’ll want to start the dispute process right away. “Suspicious activity” in this case means any loans with banks you don’t recognize or credit cards you aren’t familiar with. It can be helpful to check with a spouse to make sure there hasn’t been any unspoken financial decision-making going on behind the scenes, but if you’re in the clear in that regard, you’ll want to make sure the fraudulent loans or credit cards are removed from your report.

 

Sometimes, though, the bad information on our credit reports is just a fact of life. Finances are tough, especially if you go through a period of bad luck or make some decisions that turn out to be poorly timed. At DriveThruFinance, we understand your predicament and we want to get you back on the road even if your score is lower than 650. Bad credit doesn’t mean you’re a bad person. You deserve to move on and rebuild your credit and we can help.

Vehicle Financing 9 Ways a Car is a Good Investment for Bad Credit

il y a 7 mois

The financial industry often feels confusing and cruel, especially for those who suffer from less than perfect credit, especially if they weren’t always able to keep up with those monthly payments. While it’s true that there are some cutthroat elements out there, it is possible to find a situation in which you’re set up to succeed, even with obstacles in your way—even with car dealers and auto financing. Learn how obtaining vehicle financing can actually be a great financial move if your credit is lower than you’d like.

 

1. Demonstrating Responsibility

 

For better or worse, your credit history is the financial CV used to determine whether you’re responsible or not. The credit score is a short form summary of that history. It’s a very one-sided picture, especially if your credit history shows a lot of missed monthly payments and other difficulties. Obtaining auto loans and faithfully adhering terms of each loan allows you to demonstrate in concrete terms that you are, in fact, responsible.

 

2. Establishing Trust

 

Ultimately, the responsibility judgement associated with credit isn’t personal. It’s about trust. And unfortunately, it’s starting to become a symbol of trust not only within the financial industry but for employers as well. That means an employer, if you sign a release giving them the right to do so, can pull up your full credit history and see, in detail, how much money you owe where, how many payments you missed, and everything else. Demonstrating responsibility on your credit score by repaying your auto loan can be a good way of showing that you’re on the right track after a rough period.

 

3. Building Self-Confidence

 

Additionally, a bad credit car loan can be an opportunity for you to prove to yourself that you know what you’re doing and can make good decisions. Confidence is an underrated quality in our financial lives. We don’t often talk about the inner, emotional parts of our financial lives, opting instead to be purely analytical and calculating, but believing in yourself is essential to living a good life. Making those payments on time will feel great.

 

4. Putting a Better Personal Finance Plan in Place

 

In order to make those on-time payments, you’re probably going to need to take more control of your finances. That’s not to say that you were totally out of control before, but being as careful as possible will benefit you greatly in the long run. That may mean creating a separate savings budget to ensure you have extra money for car payments or emergencies just in case. It may mean taking stock of your daily spending habits and cutting out some unnecessary expenditure to give yourself more breathing room. Your car loan can be a useful motivator in this regard.

 

5. Improving Credit Over Time

 

As you start to rebuild trust and confidence with a smart financial plan and reliable payments, you’ll gradually rebuild credit and move into a place of greater security. This will take some time, but you’ll get a huge jump start just by having the loan in place and starting to make timely payments. As you start making allowances for your monthly credit payments and make your financial picture more positive, you’ll learn more about how to navigate the financial system and feel more empowered in a system that often seems designed to make us feel powerless.

 

6. Having an Asset for Collateral

 

Some bad credit loan options allow applicants to use their cars to “secure” the loan. This makes some lenders feel more comfortable working with those who have bad credit. There’s a big caveat for this one, though. If you default on the loan, the lender can legally take your car away from you.  If you aren’t absolutely certain you can pay the loan back on time, you’re essentially signing up to lose your car AND hurt your credit at the same time. It would be better just to sell the car and get a better deal than to lose it to a bad loan.

 

7. Having an Asset for Emergencies

 

 It’s not ideal, but having a car to sell off in the case of a serious emergency can prevent you from having to do further damage to your credit by running up credit card bills or missing payments. This scenario is heavily dependent on the terms of your auto loan. Make sure you understand the terms of your loan, including when or if you get to take possession of the car after you complete your payments and satisfy the requirements of your loan agreement. Some predatory lenders sneakily include terms that allow them to take possession of the car once payments stop, even if you’ve been perfectly faithful to the terms of the loan.

 

8. Enjoying Job Security

 

Of course, having a car is also a necessity if you want to be a reliable employee in a situation where public transportation isn’t an option. Only a few of Canada’s larger cities make public transportation a realistic option for the average worker and if you’re one of the millions of people who live outside these cities, you need your own set of wheels to show up to work on time. Having a steady job will make meeting payment requirements during the credit rebuilding process that much easier.

 

9. Exercising Personal Freedom

 

Finally, there’s something to be said for the satisfaction and happiness that comes when you have the freedom to go where you want to go when you want to go there. Whether it’s taking a road trip with your family or driving to your favorite restaurant for a treat-yourself lunch, a car is a great investment in your own happiness. Happiness lowers stress, which can help you see to your responsibilities and keep your financial health on the mend.

If you have less than perfect credit, DriveThruFinance wants to help. We specialize in providing auto financing loans to good people who’ve fallen on hard times. Our unique credit check and car financing loan application process allow us to look at the total picture of who you are, not just your credit history.

Articles

Vehicle Financing 9 Ways a Car is a Good Investment for Bad Credit

il y a 7 mois

The financial industry often feels confusing and cruel, especially for those who suffer from less than perfect credit, especially if they weren’t always able to keep up with those monthly payments. While it’s true that there are some cutthroat elements out there, it is possible to find a situation in which you’re set up to succeed, even with obstacles in your way—even with car dealers and auto financing. Learn how obtaining vehicle financing can actually be a great financial move if your credit is lower than you’d like. 1. Demonstrating Responsibility For better or worse, your credit history is the financial CV used to determine whether you’re responsible or not. The credit score is a short form summary of that history. It’s a very one-sided picture, especially if your credit history shows a lot of missed monthly payments and other difficulties. Obtaining auto loans and faithfully adhering terms of each loan allows you to demonstrate in concrete terms that you are, in fact, responsible. 2. Establishing Trust Ultimately, the responsibility judgement associated with credit isn’t personal. It’s about trust. And unfortunately, it’s starting to become a symbol of trust not only within the financial industry but for employers as well. That means an employer, if you sign a release giving them the right to do so, can pull up your full credit history and see, in detail, how much money you owe where, how many payments you missed, and everything else. Demonstrating responsibility on your credit score by repaying your auto loan can be a good way of showing that you’re on the right track after a rough period. 3. Building Self-Confidence Additionally, a bad credit car loan can be an opportunity for you to prove to yourself that you know what you’re doing and can make good decisions. Confidence is an underrated quality in our financial lives. We don’t often talk about the inner, emotional parts of our financial lives, opting instead to be purely analytical and calculating, but believing in yourself is essential to living a good life. Making those payments on time will feel great. 4. Putting a Better Personal Finance Plan in Place In order to make those on-time payments, you’re probably going to need to take more control of your finances. That’s not to say that you were totally out of control before, but being as careful as possible will benefit you greatly in the long run. That may mean creating a separate savings budget to ensure you have extra money for car payments or emergencies just in case. It may mean taking stock of your daily spending habits and cutting out some unnecessary expenditure to give yourself more breathing room. Your car loan can be a useful motivator in this regard. 5. Improving Credit Over Time As you start to rebuild trust and confidence with a smart financial plan and reliable payments, you’ll gradually rebuild credit and move into a place of greater security. This will take some time, but you’ll get a huge jump start just by having the loan in place and starting to make timely payments. As you start making allowances for your monthly credit payments and make your financial picture more positive, you’ll learn more about how to navigate the financial system and feel more empowered in a system that often seems designed to make us feel powerless. 6. Having an Asset for Collateral Some bad credit loan options allow applicants to use their cars to “secure” the loan. This makes some lenders feel more comfortable working with those who have bad credit. There’s a big caveat for this one, though. If you default on the loan, the lender can legally take your car away from you. If you aren’t absolutely certain you can pay the loan back on time, you’re essentially signing up to lose your car AND hurt your credit at the same time. It would be better just to sell the car and get a better deal than to lose it to a bad loan. 7. Having an Asset for Emergencies It’s not ideal, but having a car to sell off in the case of a serious emergency can prevent you from having to do further damage to your credit by running up credit card bills or missing payments. This scenario is heavily dependent on the terms of your auto loan. Make sure you understand the terms of your loan, including when or if you get to take possession of the car after you complete your payments and satisfy the requirements of your loan agreement. Some predatory lenders sneakily include terms that allow them to take possession of the car once payments stop, even if you’ve been perfectly faithful to the terms of the loan. 8. Enjoying Job Security Of course, having a car is also a necessity if you want to be a reliable employee in a situation where public transportation isn’t an option. Only a few of Canada’s larger cities make public transportation a realistic option for the average worker and if you’re one of the millions of people who live outside these cities, you need your own set of wheels to show up to work on time. Having a steady job will make meeting payment requirements during the credit rebuilding process that much easier. 9. Exercising Personal Freedom Finally, there’s something to be said for the satisfaction and happiness that comes when you have the freedom to go where you want to go when you want to go there. Whether it’s taking a road trip with your family or driving to your favorite restaurant for a treat-yourself lunch, a car is a great investment in your own happiness. Happiness lowers stress, which can help you see to your responsibilities and keep your financial health on the mend. If you have less than perfect credit, DriveThruFinance wants to help. We specialize in providing auto financing loans to good people who’ve fallen on hard times. Our unique credit check and car financing loan application process allow us to look at the total picture of who you are, not just your credit history. Charbel Matar is the owner and dealer principal at Drive Thru Finance Ontario. DriveThruFinance provides Canadians facing all types or financial circumstances a simple process to you find the perfect loan for the vehicle you need. By completing our simple online application from the comfort of your home, work or favorite mobile device, you will be able to have access to multiple financing options without ever having to visit a dealership. The whole process will take only a few short minutes and we will only ask you a few simple and easy questions. Apply for your car loan and get approved for our DriveThruFinance program today! Visit us at www.DriveThruFinance.com