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7 Feb 2019

Why You Might Need Bad Credit Loans Even With Good Credit

Did you know that having a good credit score might no longer be enough to get you a standard loan? Some types of lenders are now using something called a bankruptcy score to measure whether or not a person is a good credit risk, and if this score is high enough, it may override the positive effects of having good credit. This new development in the Canadian credit market could make bad credit loans more prominent than ever.

What Is a Bankruptcy Score?

In order to understand what kind of threat that your bankruptcy score might pose to you, you must first understand what that score is. As it turns out, it’s a hidden metric that banks and other financial institutions use to investigate who might have a credit score that is not reflective of their actual ability to pay off their debts. Your credit score is not updated in real time with your as your credit behaviour changes; in other words, if you start being more or less responsible with your credit after a long pattern of having done the opposite, it will take some time to show up in your score. In other words, just because someone hasn’t gone broke just yet doesn’t mean they aren’t on the verge of doing so. That’s what the bankruptcy score is trying to measure. The key four factors that are looked at when determining this score are as follows:

  • How often you use credit
  • How often you apply for more credit
  • How many credit accounts you already have
  • How much of the credit limit of each of those accounts you routinely use

All of these things are indicators of a strong reliance on credit in a person’s daily life, which usually means that they cannot afford to continue to live the way they’ve been doing and may begin to default on some of their debt obligations soon.

How Can It Impact My Life?

When your profile shows red flags in any of these ways, lenders assume that you are misusing credit in some way, usually by paying off the balance of one card with another card or some similar trick. These roundabout ways of keeping good credit will work for a while, but like any juggling act, they are bound to fail sooner or later. No lender wants to be the one left to deal with your greatly reduced ability to repay your debts if that happens, so they tend to avoid those who show these warning signs early on. If your bankruptcy score is too high, lenders will often consider that just as bad as a poor credit score and will refuse your application for any credit products.

This makes some degree of sense from their end, since the behaviours that the score is based on definitely can be indicators of risky behaviour. However, they can also be the result of someone trying their best to manage a difficult situation (such as a sudden loss of income or a new need to support an incapacitated family member) as best they can. It’s hard to fault someone for that, and in those cases, the situation may eventually resolve itself before bankruptcy or any other serious issues occur. Lenders have no way of knowing what type of situation is causing the trouble, though, nor how severe it is or how long it can be expected to last. This means that people with good intentions and the ability to repay the loan they’re asking for may be turned down anyway, simply because the circumstantial evidence isn’t in their favour.

How Bad Credit Loans Can Help

Don’t give up on getting that loan you need just because you’re having trouble with traditional providers; there is always another way to get those funds, and that’s through alternative lenders – bad credit lenders, to be more specific. It goes without saying that providers of bad credit loans don’t care about your credit score, and while it’s not nearly as widely advertised, they also don’t care about your bankruptcy score either.

This is important because even if you get to a point where you are reasonably certain that that score is what is holding you back in the credit market, you’ll have a hard time getting a precise figure for it; most lenders will not acknowledge it so openly. This means that unlike with your credit score, it can be hard to know how much you have to improve and what you have to do to get there. Until you’ve regained enough stability to be certain that your bankruptcy score is good, you may have to err on the side of caution and assume that it isn’t. For the time being, bad credit lenders will be the only ones you can count on to approve your applications without an issue. If you really need the money, having a reliable source like this around can be a lifesaver.

Get Help Finding Bad Credit Loans Canada From Bonsai Finance

If you’re looking for a loan that won’t penalize you for your bankruptcy score, you still have a bit of a journey ahead of you. There are countless bad credit loans available to Canadians, so it can be extremely hard to read up on all of them and pick one out. What if you didn’t have to do all that work? You don’t, if you let us here at Bonsai Finance help you. We make it easy to find bad credit loans Canada, so all you have to do is pick out your favourite from the lineup we show you. All offers that appear in our portal come from our trusted partner lenders who we’ve worked with for a long time, and we have full confidence in saying they’ll be able to meet your needs. No more roadblocks: you’ll get that loan just like you’ve been wanting to.