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Tag: rebuilding credit

  • Rebuilding Credit: Bad Credit Rating Doesn’t Always Just Disappear After a Few Years

    rebuilding credit pngIt is a very common misconception that bad credit just “disappears” once debts are paid and your credit behaviour improves. However, past credit activity doesn’t just evaporate into thin air with a few months (even a few years) of good behaviour. Rebuilding credit takes some work.

    For example, if you file for bankruptcy in January of year one, pay on time, every month, and are discharged in January of year 3, that bankruptcy will remain on your report for 6 years following the date of discharge (January of year 9) – not from the time that you declared.

    When it comes to consumer proposals, these stay on for 3 years following payment in full, as does any credit counselling.

    Periods of inactivity can also impact your credit rating. For example, if a lender assigns debt to collections, this results in activity, and negative activity at that. However, if you don’t have any activity, this is not necessarily a good thing either.

    When it comes to activity, a tip is to continually use credit and to repay that credit on time, all the time. A secured credit card is a good way to do this without being tempted to start relying on credit again or getting back in over your head.

    So, if you have bad credit and want to clean it up, here are a few steps you can take to get the process started:

    • Step 1 – Get your credit report and see what it says. These are available online from both Equifax and TransUnion. Some lenders use one, whereas some look at both.
    • Step 2 – Deal with the bad credit debt on your credit report by paying it off. Better yet, settle it for far less than you owe with a consumer proposal to stop interest and reduce overall amounts.
    • Step 3 – Document EVERYTHING. Any time you settle a debt, get a letter re: settlements and arrangements and copies of proof of your action. It can take some time for these payments to register, but keep on top of it.
    • Step 4 – Make sure the credit reporting agency knows these debts have been paid – don’t count on your lender to tell them. Send the above noted documents via registered mail to ensure they reach their intended destination.
    • Step 5 – Begin the process of rebuilding. Consider a secured credit card to show you are committed to maintaining positive history.

    When it comes right down to it, the only way to improve a poor credit rating is to pay your debts and allow time to pass to show that your payment habits have improved.

    For more information about how to rebuild your credit effectively, call DebtCare Canada today at 1-888-890-0888.

     

  • Rebuilding Credit Doesn’t Have to be Like Climbing Mount Everest

    Rebuilding CreditDebt, for many Canadians, is an everyday issue. But it isn’t only debt that can be problematic – even when you get rid of your debt! If debt has caused your credit score to plummet it might be time to think about getting it back in shape. There are a number of ways that you can work on rebuilding credit, but we thought we’d provide you with some of the best ways to do so.

    Here are some good strategies for rebuilding credit:

    • Keep balances low on all credit products. When you pay off a credit card, or pay it down significantly, keep it that way. However, if you can’t pay off a big chunk at least try to keep the balance low. The typical rule of thumb is no more than 65% of your total available credit. This shows that, although you have access to the credit, you are not relying on it, demonstrating that you are not necessarily living outside of your means.
    • Avoid applying for too much credit. When you apply for any type of credit product, this gets reported to your credit report, and when you continually apply for credit this negatively impacts your overall credit. This is because it looks as though you are a credit seeker – someone who can’t afford to live without credit, but also has a hard time qualifying for it. Try to limit the number of applications you submit, including those done by current creditors (ie. credit limit increases).
    • More than minimum payments. Minimum payments are mostly interest, so in an attempt to rebuild credit try to make more than the minimums, even if it is only a little more than what is required. This has the added benefit of helping you pay off the total balance faster.
    • Keep an eye on your credit report – but don’t go overboard. It is always smart to know what is going on with your credit report, so checking it periodically is a good idea. With that said, checking it every other week is largely unnecessary, and even though your own inquiries are reported to your credit report as ‘soft’ inquiries, they are still reported, and any activity can have an impact on your score. Resist the temptation to check on too regular a basis – perhaps limit it to quarter-annually.
    • Get a secured credit card. With a secured card you, as the cardholder, make a deposit onto the card and this becomes your limit. At the same time, you are required to make regular payments to the card (to pay off your ‘balance’), but if you default the money comes from that initial deposit. Keeping up the regular payments helps to rebuild credit as it shows positive credit activity.

    Rebuilding credit can take time, but it doesn’t have to be difficult. Don’t just assume that because your debt load has decreased, your score has increased significantly. Use these strategies to bring that score back up.

    For more about methods for rebuilding credit please contact DebtCare Canada today at 1 (888) 890-0888 or visit us online at www.debtcare.ca

  • School For Debt Relief #3: Rebuilding Credit

    Debt ReliefThe beginning of the school year is behind us; students have settled in and teachers have found their groove. This final blog in our school for debt relief series will help get you back on track for the rest of the school year. Once you have worked out your debt repayment plan, stopped the collection calls and gotten your finances righted, it is time to think about rebuilding credit.

    If your debt became problematic in the past, it is highly probable that your credit has taken a hit. Thanks in part to things like missed or late payments, having too much credit or a bankruptcy or consumer proposal, your credit is now very likely at the low end of the scale and you may be finding it very difficult to secure any sort of financial funding. If this is where you currently find yourself it is important to understand that rebuilding your credit takes time, but it is possible.

    Here is our list of the top ways to help rebuild credit.

    Apply for a secured credit card. With a secured credit card, you make a deposit on the card which the creditor then holds as a guarantee. This deposit, usually equal to your credit limit, lets you make regular purchases with the card without the lender worrying about security. Having a secured credit card shows up on your credit report, letting other creditors know that you are being responsible with your credit and not spending outside your means.

    Make at least the minimum payment. This is crucial, as it may be what brought your credit down in the past. It is always a smart practice with a credit card to try and pay off the entire balance each month – that way you don’t accrue any interest and can’t get in over your head. That being said, if you cannot make the payment in full make sure that you pay at least the minimum, or just a little more if possible. Any missed or late payments will just get that score decreasing again.

    Don’t apply for too many credit products. Applying left, right and centre for credit is going to make you look like you are a credit seeker – and this implies that you cannot meet your monthly needs. Also, do not have too many credit products. Just because you have cards with high limits without using them doesn’t mean that your credit will be good. Keep limits low.

    Review your statements regularly and check your credit report annually. To avoid mistakes and to ensure your payments are always made on time, review your statements monthly and report any errors immediately. This is also a good rule of thumb with your credit report – it should be checked for errors and those errors reported on at least a yearly basis (but not too often either).

    Just because you have had trouble with credit in the past doesn’t meant that it has to haunt you for the rest of your life. Use these tips to help rebuild credit. And remember, Rome wasn’t built in a day; rebuilding credit takes time – just be responsible and think before you spend.

    For more information about rebuilding credit or for debt relief please contact DebtCare Canada by calling 1-888-890-0888 or visit www.debtcare.ca.