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Tag: rebuild your credit

  • The Complete Guide to Credit Repair for Real Estate Investors

    The importance of a good credit score should never be overlooked or taken lightly. This is more trying for real estate investors. A high credit score means better offers, deals, and money-saving options, which would provide a real estate investor many options to finance properties and manage the mortgage lending process.

    In this blog, we will talk about the impact of credit reports on real estate investors, as well as what to do if you have bad credit, how to maximize credit repair, and how to utilize credit repair service. 

    Why credit score matters

    One of the first few things a lender looks at is a person’s credit report. This is vital to them as the report determines the risks of their investment. A credit report is essentially a statistical method to identify a person’s chances and ability to pay back the money that they borrow.

    The average credit score for a normal real estate loan is 752. Anything about 760 is already considered top tier, which ensures they get the best rates and most choices from lending companies. It’s also inevitable that they get prioritized during the lending process. 

    However, credit scores that fall below 620 are considered subprime accounts, making it more challenging to find a loan provider that could – or would – provide individuals with a good deal for their loan. This is where credit repair comes in.

    Reasons why you need credit repair

    A credit score doesn’t only matter when it comes to real estate or property investment. Here are some valuable information and other reasons that will inspire you to have or maintain a good credit score:

    Better Interest Rates

    Low credit scores often result in higher interest rates, which would mean property loans would have higher interest charges. Having good credit would give you the chance to enjoy competitive interest rates, as well as save on the interest you need to pay.

    Avoid Debt Collector Harassment

    One of the most stressful parts about being in debt is the harassment from debt collectors that come with it. This is inevitable as these agents will do everything they can to get you to clear your debts, such as balances on credit cards. There’s a good chance that if you don’t clear out the issue, your account will be passed on from one collector to another, multiple agents will have your information, and you’d go through the entire collection process all over again.

    Less (or No) Reliance on Co-Signers

    When you apply for a loan but have bad credit, creditors would often require you to provide a co-signer, such as a family member or friend, before you can proceed with your application. But keep in mind, by doing so, you’re putting financial—and perhaps even legal—pressure on them.

    Fund Your Startup Business

    A lot of entrepreneurs looking to start their new business often rely on small business loans to get their venture off the ground. Like with any other loan type, having bad credit can hinder you from getting the funds you require for your startup.

    Rent or Lease an Apartment

    For people who are not yet ready to buy real estate, renting an apartment is the better—and more common—option. However, more landlords are now becoming more particular with who they take on as tenants. Because of this, they’re now performing credit checks to determine the odds of possible late payment from tenants.

    Buy a New House

    Now to the big one—home ownership. This is the dream for most people. Unfortunately, not everyone gets the chance to achieve this due to bad credit. Most banks will reject applicants with disappointing credit, and in the case that they will give these borrowers a chance, they might find the high-interest rate difficult to deal with. However, for those who are looking to sell their homes to buy a new one, getting the help of Trusted House Buyers is a must to ensure better prices and hassle-free processes.

    Credit repair tips for real estate investors

    A good credit report is one of the most important things a real estate investor can ever have. This information can amplify an investor’s chances of getting excellent deals when seeking a loan, such as an attractive mortgage and refinancing fee.

    However, not every optimistic future homeowner has a that can easily be approved for loans. There’s a big chunk of real estate investors who currently need help with credit repair. To help resolve this, we’ve listed down a few essential credit repair tips that every real estate investor should look into:

    Get a Copy of Your Credit Report

    Before anything else, you must first get a copy of your credit report from at least three credit bureaus. The biggest credit reporting bureaus in the United States are Experian, Equifax, and TransUnion. Doing so will allow you to assess your score, compare conflicting information, and see how bad the damage is. By seeing and understanding your score, as well as your credit history, you’ll get a good grasp of where to begin to improve your credit.

    The reason why we recommend that you get a credit report from three different credit reporting companies is that banks usually use more than one credit bureau to review personal credit reports and make lending decisions. Unfortunately, not all credit bureaus have the same updated information. Hence, errors such as work history, date of birth, and paid but not removed debts could harm you.

    Dispute Wrong Information

    It’s important to note that everything on your credit report may not entirely be accurate. Compare your report to your financial accounts, documents, and receipts, and go through everything thoroughly. If there are inconsistencies or wrongful late charges, you must address them right away. Don’t be afraid to dispute anything that you think might be an error. Credit bureaus are required to investigate claims and get back to you within 45 days of your notice as part of their dispute process. 

    Avoid Late Payments

    One late payment can have a huge impact on your score, so you must avoid them at all costs. However, if you’ve recently had delays with bills, you can contact the biller and ask that they remove it. Not all companies would agree to this, but you can try offering a regular payment setup in exchange for their consideration on the matter. Strive to avoid this issue altogether by doing your best to pay your bills on time from the get-go.

    Settle or Pay Down Existing Debts

    As we’ve established, your credit history and existing debt make up your score. Paying off credit card loans and other financial backlogs would greatly help your credit repair process. If you can’t pay these off in one go, you can at least ensure that they’re minimized as much as possible to give you a good chance before you apply for financing in real estate.

    Benefits of using a credit repair company

    Credit repair is not a walk in the park. It’s time-consuming and quite stressful, especially if you’re no credit expert. However, the benefits are all worth it. That’s where credit repair companies come in. These credit repair companies are experts in the field of the credit report, credit repair process, and credit repair organizations act.

    Here are the top reasons why using credit repair services are recommended:

    Expert Advice

    A credit repair company can give you expert credit consultation from the very beginning, as well as guide you through the entire credit repair process. Their objective is to get you out of the financial tangle you may be in. They would look into your credit reports, your accounts, and finances to effectively identify the root of your financial problems. Doing so would allow the credit repair company to provide you with tailored solutions, resulting in more productive consultation.

    Professional Approach

    Credit repair companies have no emotional attachments to you or your situation. However cold that sounds, it would allow them to efficiently guide you on how to make payments. It’s also part of their duty to draft policies and strategies to aid you in managing your expenses to ensure you can fix your credit.

    Connection with Creditors

    Credit repair experts often have better relationships with lending companies. This allows them the flexibility to negotiate on a client’s behalf and makes the entire process easier for real estate investors.

    Comprehensive Knowledge of Laws

    In-depth knowledge and understanding of policies and laws allow credit repair companies to help clients get the best chances. A professional credit repair company is well-versed and compliant with laws, such as:

    • The Fair Credit Reporting Act (FCRA).
    • The Fair Debt Collections Practices Act (FDCPA).
    • The Fair Credit Billing Act (FCBA).
    • Other consumer financial protection statutes that follow policies of the Federal Trade Commission.

    For those who have good credit, ensuring that it’s maintained at a good standing is important. But for those whose credit reports are at a disadvantage, then focusing on credit repair is a must to ensure you can have the best chances when investing in real estate. Using every strategy to repair your credit is essential that includes trusting a legitimate credit repair company with extensive experience.

    DebtCare Canada has a brand new program that places a representative in your corner – someone with the ability to deal with TransUnion and Equifax and have old items removed from your credit report. When it comes to repairing bad credit, call us for help: 1-888-890-0888.

  • Rebuild Your Credit in 2020 Using These Simple Steps

    Happy 2020! We’re just over a month into the new year. How are your resolutions going? If you’re anything like the majority of Canadians, they might have fallen by the wayside…

    A 2018 survey from Strava found that most New Year’s resolutions only last until the second Friday in January… In 2020, that was January 10.

    If your goals have been put on the backburner, please don’t beat yourself up. Recognize that it’s completely normal and the issue likely says more about the process than it does about you.

    In this blog, we’re looking at simple techniques to stick to your 2020 resolutions – specifically rebuilding your credit.

    Why do most New Year’s Resolutions fail?

    Some people say that resolutions never last. But the problem is often in the intention vs. the action. Many people enter the new year with big goals and big plans – that prove to be difficult to stick to.

    They try to do too much at once or only set vague goals (like save more money) without thinking about what the daily actions will be.

    There’s a better way. Through simple, clear, consistent action you can make big progress on your goals in a way that isn’t overwhelming.

    You can also pick goals that give you more bang for your buck. For instance, resolving to fix your credit is a great goal because in turn it:

    • Helps you plan your budget.
    • Creates awareness around your financial habits.
    • Deals with debt.
    • And has far-reaching consequences – it’s a goal that will serve you well into the future and can extend into other good financial habits.

    If you aren’t achieving your financial goals, ask yourself – how can I make those goals more achievable and realistic for my schedule?

    How to Rebuild Your Credit in Three Simple Steps

    Want to fix your credit this year? Here’s how to do it.

    Step One: Get your credit report

    To begin, you need to know where your credit currently stands. Request a copy of your credit report from one of the Canadian credit agencies – Equifax or TransUnion.

    When you know your score, you will know your starting point.

    Learn more about the credit score range: https://debtcare.ca/credit-reports-101-the-credit-score-range-and-you/

    Step Two: Get rid of debt that is harming your credit

    While there are several steps you can take to fix your credit, remember that we are focusing on the most impactful actions. You want to take the steps that are going to garner the most improvement in the simplest ways.

    For rebuilding your credit, that is getting rid of debt.

    When you’re carrying problem debt, it’s incredibly hard to rebuild your credit score even when you practice other good habits, like paying your bills on time and in full. That problem debt will still be dragging your score down.

    So, step two is finding a way to get rid of that debt.

    You could consider:

    • Making a settlement with your creditors.
    • Paying the debt in full (if you have the funds or can get them).
    • Consolidating debt through a debt consolidation loan.
    • Filing for a consumer proposal.
    • Filing for bankruptcy.

    Your method may vary and the method you choose may affect your credit score longer (for instance, filing for bankruptcy leaves you with an R9 credit rating) but the point here is to clear your problem debt through the best option for you.

    Learn more about debt consolidation options: https://debtcare.ca/your-2018-debt-consolidation-options/

    Step Three: Deal with debt that has already gone into default

    Beyond current debt that you’re carrying (and hopefully dealt with in step two), you might also have old debts that were never paid – these are called default debts.

    And while they may be in the past, they can still be dragging your credit score down.

    Your credit report will reveal whether you have default debts. Some of the same methods used in step two can help deal with it — such as a settlement with the creditor or filing for a consumer proposal or bankruptcy (depending on the type of debt).

    It’s also a good idea to talk to a debt counsellor to find the best way to deal with any default debts. They can assess your situation and offer advice on what methods are best for your situation.

    Learn more about what happens when you default on debt: https://debtcare.ca/will-a-creditor-actually-sue-you-when-you-default-on-a-debt/

    Moving Forward

    Once your old debts are taken care of, new credit habits will be much more impactful. Focus on building good habits, such as always paying your bills on time and in full and not taking on more credit than you can afford.

    This mindset will help take your 2020 credit repair resolution and make it a life-long behaviour.

    What’s your financial resolution for 2020? Share with us on social media. DebtCare is on Twitter, Facebook, and LinkedIn.

    Contact us for help with rebuilding your credit or achieving your other financial goals. We’ve helped thousands of Canadians get out of debt, fix their credit score, and more.

    Call 1-888-890-0888 or visit www.debtcare.ca for a free consultation.

  • 12 Days of Christmas – How to Rebuild Your Credit and Finances DebtCare Style

    debt1The holiday season is upon us, and in the spirit of the season we’ve created our very own version of the 12 Days of Christmas, based on how to rebuild your credit – with Mr. Ebenezer Scrooge as the gift-giver (after all, who better to give financial advice than one who is good with their money). It may not sound as catchy or rhyme as well as the original, but when you follow the advice, you can really cut down debt and start rebuilding your credit! Enjoy – and good luck!

    On the first day of ChristmasMr. Scrooge gave to me, an app to organize my expenses!

    On the second day of Christmas Mr. Scrooge said to me, log everything you spend your money on!

    On the third day of Christmas Mr. Scrooge said to me, create a realistic budget from that log!

    On the fourth day of Christmas Mr. Scrooge said to me, now reduce those expenses by 10%.

    On the fifth day of Christmas Mr. Scroogesaid to me, request your credit report!

    On the sixth day of Christmas Mr. Scroogesaid to me, stop applying for new credit!

    On the seventh day of Christmas Mr. Scroogesaid to me, try not to use your credit to finance your Christmas shopping!

    On the eighth day of Christmas Mr. Scroogesaid to me, be as real about your debt as you can be (look at your total debt and divide it by 48 – that is what you would have to pay monthly to be out of debt in 4 years interest free. If you fell off your chair at the size of this monthly payment you may want to review consolidation options.).

    On the ninth day of Christmas Mr. Scroogepresented to me, several viable debt consolidation options.

    On the tenth day of Christmas Mr. Scroogesaid to me, find a financial professional you can trust.

    On the eleventh day of Christmas Mr. Scrooge said to me, vet that professional to make sure they’re legit (he also suggested looking at a representative -not a bankruptcy trustee – someone who will represent YOU – not your creditors).

    On the twelfth day of Christmas Mr. Scrooge said to me, take all of these tips and start to rebuild!

    Ok, we get it – this was a rather unconventional way of presenting our best advice on how to rebuild credit – but the advice is real. Taking a good, hard look at your debt, figuring out where you can cut expenses, and taking the steps to find the best debt professional and the most viable debt relief options, including a mortgage, a consolidation loan, a consumer proposal or bankruptcy, really are the best ways to get back on track financially.

    At DebtCare Canada, we are committed to helping you regain control of your money. If you are looking at ways to rebuild credit, call us today at 1-888-890-0888.

     

  • Dealing with Collection Agencies: Harassment and The Collection Agencies Act

    In Canada, if you have a debt that goes into default, your creditor can assign your debt to a collection agency to be collected. The collection agency will then attempt to collect the debt from you. They will do this by calling you, sending you letters, and some creditors will even grant collection agencies the authority to sue you.

    Dealing with collection agencies is no fun! When a collection agency is after you they can be ruthless and even harass you. Some people find themselves feeling powerless when dealing with collection agencies.

     

    Dealing with collection agencies used to be even worse than it is now, but as a result of public outcry, the government decided to begin regulating them. Collection agencies are regulated provincially and all provinces have legislation that regulates the activities and conduct of collection agencies and their collections. In Ontario, for example, this legislation is referred to as the Collection Agencies Act and is administered by the Ministry of Consumer Services.

    Although all provinces regulate collection agencies, with regulations varying from province to province, here are some things that, across the board, collection agencies can’t do.

    • Ask you for payment without first having notified you in writing that they have been retained by your creditor to collect the debt.
    • Make phone calls to you with a frequency that would be considered harassment.
    • Make phone calls to you outside of the days and hours the legislation in your province mandates.
    • Ask you to pay a debt without having provided you with the name of the creditor and the total amount owed.
    • Provide personal information to third parties, such as other people in the household, or leave it on your voicemail.
    • Contact your employer (unless there is a court order), neighbours or friends to obtain an address or telephone number for you.

    Sometimes life throws us a curve ball and no one wants to end up with a debt in collections. Having a debt in collections is an indication of an underlying financial problem. While you may be able to count on things like the Collection Agencies Act to control the behaviour of your creditor’s collection agencies, you won’t be able to stop dealing with collection agencies until you have a plan to deal with your debt.

    So many people get stressed out when dealing with collection agencies that, instead of facing the debt head on, they alter their lifestyle. They stop opening mail or answering the phone. Don’t do this!

    There are financial solutions to deal with debt that is in collections and companies that specialize in these types of problems. Some financial solutions can even reduce the size of your debt or freeze the interest on your debt, and all financial solutions will stop collection action!

    Just imagine your life without the phone ringing off the hook every moment. Imagine being able to rebuild your credit. Imagine having control over your debt. All is possible – it’s up to you to take the first step.

    For more information about dealing with collection agencies or if you need help with a financial problem please contact DebtCare Canada at 1-888-890-0888 or visit www.debtcare.ca.

  • Stopping Collection Action before the Holidays

    The holidays should be a time for joy and family, not a time to be stressed out about your finances and trying to deal with bill collectors. Bill collectors are employees of collection agencies, and it doesn’t matter to them what time of the year it is. If a bill collector has been hired to collect a debt he or she will proceed with collection action.

    When bill collectors begin collection action you may feel powerless to stop it. Stopping collection action is difficult, and before you can do it you have to educate yourself about what types of collection action are legal. You also need to have a plan to deal with the debt. This way, when you begin taking steps towards stopping collection action, you have something to propose to your creditors to satisfy them so that you can enjoy your holiday without worrying about your debt.

    Generally speaking, the number one tactic that collection agencies deploy is communication. They will communicate with you by phone and by mail. The agency may call you several times per/day, in the evenings and on the weekends. For those of you who live or work with others who don’t know about your debt, this can be very embarrassing.

    Some collection agencies have paralegals on staff and have the ability to sue you. In this case, stopping collection action can become even more difficult because the court is involved. With that being said, it is possible to stop collection action being taken against you, even if the collection agency has sued you on behalf of your creditor.

    Certain communication from collection agencies is acceptable, while other forms of communication are not. Excessive phone calls, leaving personal information on voicemail or threats are all tactics collection agencies are not allowed to use when collecting a debt. Collection agencies in Ontario are regulated by the Ministry of Consumer Services. On the Ministry of Consumer Services website you can learn about your rights and even lodge a complaint if you believe that a collection agency has violated them.

    Now, if you have debt that has gone to collections you cannot ignore it. While you may be able to stop some collection actions, the debt will not simply go away. Owing that money is not the only thing to think about, as collection action can have long-term implications on you and your family. You need to have good credit these days because everyone checks credit. Having bad credit and debt can impact your ability to get a job, buy a home and even open a utility account or bank account.

    There are programs available which are effective at stopping collection action, even if the collection has a judgement against you or plans to or is garnishing your wages. These programs can also help you get rid of your debt and rebuild your credit. This is why it is so important not to ignore your debt over the holidays and look for ways to deal with it once and for all.

    By working with a good financial consultant, you can have your credit and finances reviewed to see what options are available to you and you may find that you can start the New Year collection free.

    For more information about stopping collection action and how to deal with your debt please contact DebtCare by visiting www.debtcare.ca or call 416-907-2582.

  • Debt Relief in Canada Blog Series Part 3 – Are There Consequences to Filing for Bankruptcy?

    There are many options for debt relief in Canada, and one of the most common is bankruptcy. If you have financial problems, bankruptcy may seem like a scary option because of the consequences that many people associate with filing for bankruptcy. Hopefully this article will help you to understand bankruptcy better and determine if in fact it could be an option for debt relief that you should consider.

    Bankruptcy is generally filed by people who have limited income or significant debt in relation to their income. Most first-time bankruptcies last either 9 or 21 months. When an individual files for bankruptcy, a trustee in bankruptcy will assess the bankrupt’s household income, assets, liabilities and personal circumstances. Personal circumstances include the number of people in the household and the number of dependents that the bankrupt has. Based on bankruptcy guidelines, if your income, once all factors are considered, is below a specified threshold, then the monthly payments in bankruptcy will last for 9 months. If the income is above a specified threshold, then it will be determined that the bankrupt has surplus income. This will result in higher payments in bankruptcy over a specified period of time, in most cases 21 months.

    Some of the pros of filing for bankruptcy are:

    • Immediate relief from collection action from unsecured creditors (such as wage garnishments).
    • A monthly payment that is less than what you are likely contractually obliged to pay to your creditors now.
    • The opportunity for a fresh start to get out of debt in a short period of time, enabling you to rebuild your credit and finances.

    Many people don’t know that, in many cases, when you file for bankruptcy you are able to keep your home and vehicle.

    Some of the cons of filing for bankruptcy include:

    • If your financial situation improves during your bankruptcy you could be subject to additional surplus income. If there was no surplus income when you filed for bankruptcy and your bankruptcy repayment is over 9 months, surplus income during bankruptcy could result in your monthly payment in bankruptcy being extended to 21 months.
    • The bankruptcy will remain on your credit report for 6 years from the date it is discharged. With that said, most financial institutions will do business with a bankrupt individual who has 2 years of re-established credit after bankruptcy.
    • Having a number of assets with equity in them will complicate things. In this case, a consumer proposal may be a better option than bankruptcy.

    Bankruptcy is a very viable debt relief option in Canada, and while there are some consequences of filing for bankruptcy, in many cases there are many more benefits. Bankruptcy is an option for debt relief in Canada that can provide you with immediate relief, not only from collection action, but also the stress that accompanies a financial problem. If you have creditors that are currently after you, perhaps even suing you, this is relief that can provide you with a breath of fresh air, enabling you to think clearly again and get your personal and financial situation back on track.

    For more information about options for debt relief in Canada or to see if you are a candidate for bankruptcy please call DebtCare at 416-903-4000 or visit www.debtcare.ca.

  • Debt Relief in Canada Blog Series Part 1 – Is a Consumer Proposal the Answer?

    Debt relief in Canada is a subject that is constantly in the news for many reasons, whether it is the government reporting on the fact that Canadians are carrying historically high levels of debt, reporting on debt reduction companies and what to watch out for, reporting on changes to CMHC lending guidelines to stop those who are loaded with debt from buying homes that they really can’t afford, and more…

    Unfortunately, most people who have too much debt don’t realize that they have a problem until managing minimum payments starts to become challenging, resulting in a debt problem turning into a debt emergency. There are many options for debt relief in Canada, but each one is different, and the right one for you will really depend on your own personal circumstances.

    Making a consumer proposal is one option for debt relief in Canada, but the question is: is a consumer proposal the answer?

    A consumer proposal is a type of proposal that is made to your creditors and is administered by a bankruptcy trustee who represents both you and the creditors that are included in your consumer proposal. Consumer proposals are crafted based on your ability to repay your debt realistically. Consumer proposals are repaid monthly, usually over a period of 3-4 years. With that being said, a consumer proposal can be paid off sooner if your financial situation changes. Consumer proposals are removed from your Equifax credit report 3 years from the date that they are paid in full, which provides a further incentive for those who are in a consumer proposal to pay it off early. Because consumer proposals allow you to make a single monthly payment that fits within your budget and enables you to rebuild your credit faster, consumer proposals are a very popular option for debt relief in Canada.

    Since consumer proposals are based on your ability to make a monthly payment and not on your total debt load, oftentimes consumers can reduce their overall debt through a consumer proposal. In a simple, very general example, if your total unsecured debt is $20000 and you can afford to pay $200 per/month for 5 years based on your budget and the consumer proposal guidelines, the total value of the consumer proposal would be $12000, meaning you would reduce your debt by $8000. Each case is different, and your consumer proposal must be fair to your creditors as they have a say as to whether or not they will accept it.

    When you make a consumer proposal, your creditors will receive your consumer proposal by mail and have 45 days to respond and vote as to whether they accept or reject your proposal. If a creditor does not respond to the consumer proposal within 45 days, they lose the ability to vote and the proposal is considered accepted. In addition, if the majority of your creditors accept the consumer proposal, it will be approved.

    Consumer proposals are suited to individuals who have higher incomes, as they are subject to surplus income in bankruptcy.  When a consumer has surplus income his or her payment in bankruptcy will be much higher and this is what makes a consumer proposal a more attractive option for a higher income earner. Consumer proposals are also better suited to an individual who has some secured creditors and to someone who has the ability to repay a good portion of his or her debt but simply cannot manage the contractual payments that they currently have with creditors.

    For more information about options for debt relief in Canada or to see if you qualify for a consumer proposal please call DebtCare at 416-903-4000 or visit www.debtcare.ca.

  • How to Rebuild Your Credit Blog Series – Part 4 Having Too Many Credit Products and Too Much Debt

    This is the fourth blog in a 4 part blog series about how to rebuild your credit. When you accumulate too much debt or have too many credit products, this can harm your credit. Credit card companies are aggressive, using marketing points programs, promotion and incentives to entice consumers to take out a credit card. Over time, it is not difficult to find yourself with several different credit cards with balances that are accumulating interest.

    If you want to know how to rebuild credit and you have several credit cards, your first step will be to close some of them. Some financial advisors will tell you that closing credit cards will actually harm your credit, when in fact in the long run getting rid of credit cards will increase your credit score. Having one or two credit cards is sufficient to have good credit so if you have more than that, closing some of them is a good idea. How you go about closing credit cards is the key.

    Firstly, closing all of your credit cards is not a great idea unless it is part of an overall plan to settle out your debt, and then taking out a single card to rebuild your credit. Simply closing down all of your credit cards without a plan to have a credit item to rebuild credit will reduce your credit score. If you have accumulated a lot of credit card debt and are working with a company to get rid of your debt with a plan to rebuild, then naturally it will involve wiping the slate clean (clearing and closing all credit card debt) and then starting fresh. In the absence of a financial plan to rebuild, closing all of your credit cards may reduce your credit score because you will not have credit reporting to your credit report. This is necessary to build your credit score because it shows new potential creditors, mortgage providers for example, how you pay your monthly obligations.

    Also, do not close out credit cards that have balances. If there are balances on credit cards you should first deal with the balances either by paying them off, settling them, or including them in a financial program to get out of debt. Once the balances are cleared, you can go ahead and close out the card. If you close cards when you have balances the result will be a credit card that has a balance and a zero credit limit and this will have the same negative impact on your credit report as if you have a credit card that is maxed out (see part three “Credit Balances That Are At, Close to or Over” in our four part blog series How to Rebuild your Credit).

    Additionally, if you plan to close out your credit cards make sure you write to the credit card provider clearly indicating that it is you who wants to close out the credit card balance. When a creditor closes your credit card they can report one of two things to the credit bureau: “credit limit closed by consumer” or “credit limit closed by credit grantor” – you do not want the latter reported on your credit report. Sending a letter will enable you to prove to Equifax that you in fact closed the card in the event that the credit does not report who closed the card accurately.

    This may all seem like good advice, but if you are drowning in credit card debt, closing credit cards right now is not really an option without a financial plan. Learning how to rebuild your credit takes time, as does dealing with accumulated credit card debt. There are fast and effective methods to deal with debt and start rebuilding your credit, but in most cases they will involve the assistance of a financial professional who can guide you out of your debt with a plan.

    If you would like more information about how to rebuild your credit or if you are in debt and need some guidance, please call DebtCare at 416-907-2582 or visit www.debtcare.ca.

  • How to Rebuild Your Credit Blog Series – Part 3 Credit Balances That Are At, Close to, or Over

    This is the third part in a four part blog series about how to rebuild your credit. Learning how to rebuild your credit begins with learning how to manage it. One major impact to your credit score is when you have credit card products that are close to, at, or over their limits.

    Many people think that the best way to build credit is to get a credit card, use it, and then make monthly payments. This is a dangerous proposition. How you manage each credit card will impact your credit score either by either increasing or decreasing it.

    Learning how to rebuild your credit means understanding how your credit habits can result in a decrease to your credit score. As a rule of thumb you should try to ensure that your credit card balance does not exceed 75% of your limit. If it does, it will not only reduce your credit score but will also trigger a message on your credit report that says “proportion of balances to credit limits are too high”. Even if you have 10 credit cards and only one of them is close to, at, or over the limit, it will negatively impact your credit score and trigger the above mentioned message on your credit report.

    If you have had bad credit in the past and are trying to figure out how to rebuild your credit you may see a secured credit card as one option, and financial professionals will often suggest this as a way to rebuild credit. When you take out a secured credit card, you will send the credit card company a deposit and then they send you a credit card with a limit equal to or less than the deposit you sent them. When you do this, that credit card has the potential to rebuild your credit. Re-loadable credit cards are not secured credit cards and do not rebuild your credit.

    When trying to rebuild your credit, if you take out a secured credit card it is likely that your secured credit card will have a smaller limit, usually $200, $500 or $1000. We discussed the issue of how much of an impact it can have to your credit if you have a balance on even one credit card that is close to, at, or over your credit limit. This is one of the most common mistakes people make when they take out a secured credit card. Capital One is a company that offers secured credit cards and often a first time secured credit card with Capital One will have a low starting limit of a couple hundred dollars. Even if the limit on your secured credit card is only $200, do not carry more than 75% of your limit as a balance. For example, if your secured credit card has a limit of $200, do not run a balance higher than $150.

    In other situations, when people begin nearing or going over their credit limits on credit cards, it is a sign of a deeper financial problem. It is very easy to get in over your head with credit cards. You may have a few credit cards and one month you may use one to make an expensive car repair, and then another month you may use another when you go on vacation, and then another month you may use another one to make repairs in your home. Before you know it you can have several credit cards with high balances and when interest begins to accrue they can become very difficult to pay off. Minimum payments barely cover interest and if you get caught in a cycle of only being able to afford the minimum payments it can take many, many, years to pay them off.

    If you want to know how to rebuild your credit and you have credit card debt and are only making minimum payments right now, it may be time to make some choices that will enable you to rebuild your credit. Sometimes it’s hard to know which choices are the right ones when it comes to dealing with your debt. There are many resources available to people who struggle with debt. Once you have dealt with your debt and are beginning the process of rebuilding credit, your best option when using a new credit card that is meant to rebuild credit is to use the card for limited expenses, such as gas, and only use as much as you can afford to pay off in full in a given month.

    If you would like more information about how to rebuild your credit, or if you are in debt and need some guidance, please call DebtCare at 416-907-2582 or visit www.debtcare.ca.

  • How to Rebuild Your Credit Blog Series – Part 2 Late Payments and Defaults to Creditors

    This is the second part in a four part blog series about how to rebuild your credit. If you have made late payments on your credit card or have defaulted on debts to creditors this will have a severe impact on your credit that will not resolve itself until you deal with the debt you owe. Many people think that late payments and defaults on debt obligations simply disappear after 7 years, but this is not the case.

    If you want to know how to rebuild your credit you will need to understand “tradelines” and how long items remain on your credit report. There are two different areas where credit is rated on your credit report. Your credit score, also known as your beacon score or fico score, is a number between 300 and 900 which scores your entire credit situation. 300 is the worst credit score and 900 is the best. Most banks like to see that individuals have a credit score of 680 or higher.

    The second area on your credit where you are rated is on “tradelines”. Each loan or credit card provider will report on their own tradeline how you have paid them. The tradeline will show the name of the creditor, the starting balance of the credit product, your repayment terms, your current balance, the number of times you have been 30, 60 or 90 days in arrears and an overall rating. If it is a credit card, there will be an R or an I with a number beside it. R is used for credit card and line of credit products and stands for revolving because credit cards allow you to constantly borrow against them. I is used for loans and stands for instalment because loans are repaid in equal monthly instalments.

    You may have heard people say that they have an R1 or an R9 on their credit report. The number beside the letter represents the current standing of the account. 1 means up to date, 2 means 30-60 days in arrears, 3 means 60-90 days in arrears, 4 means 90-120 days in arrears, 5 means 120 days to 150 days in arrears, 7 means you are in credit counselling, 8 means that you have had security repossessed and 9 means that the account is a bad debt (6 months or more behind). When you have an account showing a number from 2-5 beside the letter, if you pay the account up to date the rating on that tradeline will be restored to a 1, however the record of the late payment will still show. If your rating falls to a 9 it will remain a 9 until 6 years from the date that the creditor reports that the debt was settled or paid in full.

    If you want to know how to rebuild your credit, a fast trick will be identifying how bad your credit actually is. If you have a lot of debt, habitual late payments, or 9’s on credit items, then looking for ways to consolidate or settle your debts is your fastest road back to having good credit.

    Simply leaving defaulted-on items on your credit will not mean that they will magically go away by themselves. They will remain there for 6 years from the last date that the creditor reported to the credit reporting agency that you owed the money.

    There are fast avenues that you can take to rebuild your credit depending on the severity of the damage to your credit and the amount of debt you owe. For example, if you leverage a consumer proposal to settle your debt, a consumer proposal is removed from your credit report 3 years from the date it is paid in full, which can in many cases result in the removal of a 9 rating faster than if you paid the debt in full. In addition, when 9 ratings are present (and where funds are available) you can often make a direct settlement with your creditor for much less than you owe which makes good sense considering that once a 9 rating is present whether you settle the debt or pay it in full the 9 rating will remain on your credit for the same amount of time.

    Figuring out how to rebuild you credit will begin with requesting your credit report so that you can know what is on it. From there you can work with a financial professional who can come up with the fastest solution to deal with your debt and rebuild your credit.

    For more information about how to rebuild your credit or if you are in debt and need help, please contact DebtCare Canada at 416-907-2582 or visit www.debtcare.ca.