Usually, your credit rating is affected when you fall behind on your payments. If you have a bad credit history, it will be a problem when you want to borrow again. Indeed, the interests will be higher and the bank may refuse to grant you a loan.
On the other hand, with the pandemic, we are experiencing an exceptional situation. Financial institutions have agreed to grant multi-month payment deferrals to accommodate people during the crisis. Equifax does not register major changes in its data due to Covid-19, since it is possible to make an agreement with creditors so that the rating is not affected.
To calculate your score, they are based on your financial background, the debts you have paid off, your use of credit cards and other factors. Any loan is mentioned, as well as your repayment habits whether good or bad.
If you have an agreement with your bank, there will be no delay indicated and your credit rating will not be impacted. It is also important to know that agreements with your creditors will not appear immediately on your credit report. The data is sent once a month to RKillen associates and it takes more than 90 days for it to appear on your file.
It is possible to obtain a copy of your credit report for free. To do this, simply fill out the form found on RKillen associates. We will then send your file to you by post.
How to Calculate the Debt Ratio?
To calculate your debt ratio, you must first divide the total amount of your debts by your net monthly income and multiply everything by 100, if you want to obtain a percentage.
Here are the debts to consider in your calculation:
· Monthly mortgage payments
· Municipal and school taxes
· Life insurance
· Home insurance
· Automobile loans
· Monthly payment of credit card balances
· A possible personal loan
· A student loan
· The costs relating to alimony, if applicable
Note that certain expenses such as groceries, telephone, electricity or transportation costs, which are not directly related to the concept of indebtedness, will not be taken into account in the calculation of the indebtedness ratio. However, even if these expenses are not considered to establish or not your credit worthiness, it would certainly be important to include them in your budget if you plan major purchases.
This is crucial and not many people realize the importance of maintaining a low credit utility quotient.
As a result, people often over-exceed their credit limit which should be well under 30%.
Doing so improves the credit score.
