|
|
 |
|
Home | Resources: |
|
9 Ways To Re-build Bad Credit |
|
 |
Let’s face it life happens. Bad credit has never been a stranger even to some of the most financially disciplined individuals. Point in case; as of 2011 the Average Canadian family debt hit $100,000 (a)! Indeed you’re not alone; add into the equation a job loss, illness, or even a fresh graduate out of college with a mountain of debt. Rebuilding credit might seem a daunting task for the faint of heart, but once you’ve decided to get started, you gradually can build momentum with these 9 important steps.
1. Know where you stand. Pull your credit score.
The first step in rebuilding a bad credit is to get a clear synopsis of what your credit history is really like. Many Canadians assume they are far below the coveted 720 score due to some past struggles, when in fact their credit rating is pretty good. On the flip side, you may have had something negative affecting you that you had no idea about (e.g. forgotten unpaid transaction after a move). It would be a rather futile effort paying off ‘known debt’ when the unknown is still affecting you. Taking a look at your credit will serve as a starting point towards the journey of rebuilding. Reputable organizations like equifax and transunion provide your credit report for a fee (usually around $25)
Tip: Once a year every Canadian is entitled to a free credit report. Get instructions here
2. Get negative notes off your credit report.
This could be due to an error, identity theft or legitimate money you owe. Regardless of the situation, it is to your benefit to try and remove the notes on your report. If it is the case you owe, you must pay off the debt before it will be removed from your credit report. On the other hand if it’s utterly impossible to pay it all off, the consumer has a right to place a 100 word statement on the credit bureau file, which can be viewed by anyone.
Tip: If you have a credible reason, you can write a statement explaining why you owed that money and amendments your taking to fix it.
3. Consider debt consolidation
Consolidation is a simple yet effective way to ensuring all your debt is taken care off with one single payment. This can also work to your advantage by reducing your overall interest rate, which will help you get out of debt sooner. It also simplifies your monthly budgeting. Several financial institutions require certain prerequisites to be satisfied before they will consolidate your debt, this could include collateral, a co-signer and your monthly income. At NewLife Debt Solution several programs are available to you.
4. If unable to consolidate, pay off debt with higher interest rate first.
If you can, we recommend that you pay off your highest interest debts first, so pay the 19% interest credit card off first, and then repay the 14% interest credit card.
5. Avoid hard inquiries to your credit.
There are 2 kinds of inquiries; soft and hard. A soft inquiry doesn’t affect your score; a hard inquiry does. It lowers your credit score by five points for six months. This is where you need to exercise discipline. Live within your means and apply for credit only if it’s the last alternative. As the old saying goes if you can’t pay for it, you can’t afford it. So don’t get a mortgage if you don’t have too. Credit applications are recorded on your file, regardless of whether you’re approved or declined.
Tips: Learn more about soft vs. hard pull here here.
6. Sign up for a secured credit card.
This is an excellent way of rebuilding credit. A secured credit card works like an unsecured credit card except it isn’t free, but protected with the money you deposit. It reports to credit bureaus immediately. Use the card sparingly each month and pay up on time. Collateral deposits varies depending on which card you decide to go with, ranging anywhere from $100 to $500 (maybe more). A proven track record of no missed payments within 12 months will improve your credit score significantly.
Tips: Many Banks in Canada offer secured credit cards start here to shop around.
7. Stop at one card.
Exactly as it says; don’t have more than one card. So cut up the rest.
8. Pay all utility bills on time.
Failing to pay up bills could potentially be a bottleneck to rebuilding your credit. More and more businesses are beginning to use collection agencies to address delinquent accounts, and when an account is received by a debt collector, it remains on your file for 7 years. So what kind of bills are we talking about? Even the most unassuming; an unpaid eBay listing fee, outstanding hydro bill, or medical bills, library fines. Pay them up.
9. Open a saving account.
If you don’t have it already, consider opening one. Making regular deposits into a savings account no matter how small, gives financial institution a sense of your financial responsibility. Even though this is not reported to a credit bureau, it disciplines you at the long run, and taken into consideration by your financial institution.
Remember, if you are experiencing financial difficulties help is available, speak to a professional today. At NewLife Debt Solution we are dedicated to helping you get out of debt. Questions or Concerns about this article? Do you have a story to share about debt? We would like to hear from you
|
|
