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5 Most Common Reasons For Bad Credit History

Credit history is a low down of your past borrowing & repayments, including bankruptcy & delayed payments. This detailed account is compiled by credit rating agencies by gathering information from your payment history, high & low bank balances, credit limits, and other sources. This information is then used for creating your “Credit Rating”. When you apply for a loan, lenders check your credit rating in order to evaluate the amount of risk involved in approving your loan. If you have a bad credit history, they may reject your loan application or hit you with high interest rates. As obtaining a bad credit mortgage in Toronto is not a piece of cake, generally people try to keep a check on everything needed to maintain a good credit score. However, most of them end up with things more complicated that they’d thought. The most common reasons which cause bad credit history are listed below.

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1.  Unemployment –
Not having a job in hand is a sure shot way to transform ones credit report into a nightmare. Unemployment initiates your struggle to make timely payments, which eventually leads to ruining your credit score. Being without a job also makes it difficult to get mortgage refinancing in Toronto.

2.  Late Payments –
Not paying the bills on time can play havoc with your credit history. Occasional late payments can still be ignored, however many consecutive late payments racked up by your side will be a red flag to credit reporting agencies. The creditor does not care whether you were unwell, your pet chewed the bill, or you forgot the due date for the payment. They simply want their money and no excuses.

3.  Charge-Offs –
A charge-off is also a common reason why many people receive bad credit. A charge off or charge-off is the declaration by a creditor that the debt is unlikely to be collected. It occurs when the borrower becomes severely delinquent on his/her debt and it becomes obvious to the creditor that he/she will never pay the bill. Charge-offs, therefore put a negative mark on your credit report.

4.  Excessive inquires –
One of the biggest mistakes people make that damage their credit score is applying for many credit cards at once. This results in multiple lenders requesting your credit history from different credit bureaus. Due to multiple inquiries in such a short time span, you are projected as too impulsive or desperate, & the effect it has on your credit report is apparently negative.

5.  High Credit Card Balances –
Whether you have a good or bad credit score depends on the ratio of your total debt to total credit available. When your credit card balance increases, your credit score drops. There are many people who are left with a poor credit history because of charging their credit cards up to the limits.

If you do not want to be denied a loan, maintain a good credit history by avoiding the aforementioned mistakes. For more information, feel free to contact us!!!

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