Credit in Canada | Refresh Financial

Credit in Canada

What Does Good Credit Mean (to Me)?

Good credit unlocks the door to yes. It’s how you get access to the things you need, like:

Approval for home mortgages
Getting cash loans
Going on holidays
Line of credit for home renovations
Not paying deposits for utilities
Getting the lowest interest rates
Low financing for car leases
Approved to rent apartments
Getting the job you want
The best phone plans
Getting a car loan
Low-interest student line of credit

Revolving and Installment Credit

Revolving and installment credit are both important to your credit score. Having both shows you can manage all kinds of credit responsibly. Here’s how they work.

What is revolving credit?

  • Can be used repeatedly, once debt is paid off
  • Like a credit card or line of credit
  • A credit card or line of credit
  • Minimum payments vary, depending on balance owing
  • No set payment amount
  • Can repay full amount owing all at once or over time
  • Can be secured or unsecured
  • Higher interest than installment credit
  • Interest charged on unpaid balance every month
Credit Card - Revolving Credit

What is installment credit?

  • Fixed payment amounts over a set term
  • A student loan, personal loan, car loan, mortgage.
  • Can be secured (a car loan)
  • Can be unsecured (a cash loan)
  • Fixed borrowing amount and term
  • Paid off in regular installments
  • Easier to plan and budget for
Mortgage - Installment Credit

What’s the Difference Between Secured and Unsecured Credit?

Credit can be offered as both secured and unsecured. Whether it’s secured or not, doesn’t actually affect your credit score. Here’s what you need to know about both.

Secured:

  • Can be a mortgage, car loan, or car lease
  • Security (collateral) can be a deposit, like cash
  • Collateral can also be the item you’re getting, like a home or car
  • If you don’t pay (default), the lender takes your security as payment
  • Can be low interest, as it is less risky for lenders
  • Can be offered when you have poor credit, like a secured credit card
  • Can be hard to get, like a mortgage
  • Can be easy to get, like a secured credit card

Unsecured:

  • Requires a good credit score
  • Cash loan or line of credit
  • Have faster approvals and less paperwork
  • Can have a high-interest rate, as there is no security for lenders
  • Unsecured cash loans are harder to get than secured car loans
  • Used for cars, home renovations, education, and medical bills
Having trouble reading your credit report? Here’s how you make sense of it: Standard Account Ratings for Credit Reports