Rebuilding credit? Fix it for good
You’ve seen the ads, promising to improve your credit score, quickly and easily. Unfortunately, this falls under the banner of “too good to be true.”
There is no magic bullet for credit rebuilding – you need to put in the work and prove that you are credit-worthy. But it’s worth doing and we’ll show you how.
Scores range between 300-900 points, and scores below 659 are considered poor-to-fair, meaning you will have a bit of trouble applying for new credit. 660 to 759 is considered good-to-very good, and scores above 760 are “excellent.”
Here are five tips to help you boost your credit score.
Safe and Secure. If you’re starting from a poor position - maybe you’ve been bankrupt or had a consumer proposal - apply for a secured credit card. It works like this; you will put down a deposit - i.e. “security” - and your credit limit will be the same amount as the deposit. Then you start using the credit card like a normal card, and pay it off regularly (we suggest weekly). Activity on this card will report to the credit bureaus, and help you rebuild your credit so long as you don’t miss payments, and don’t max out the card. So, treat it like a normal credit card and pay off the balance in full, on time, and at a minimum interval of every month.
Know the recipe. Credit scores are based on five factors with payment history carrying the most weight. Credit length, diversity, inquiries, and overall debt make up the rest. So, to move the needle you need to pay on time, every time, keep your longest credit relationships healthy, reduce inquiries, and don’t max yourself out. We like this resource by Loans Canada.
Use but don’t abuse. Don’t be afraid of your credit card or line of credit. Instead, use it in a controlled way — especially during the holidays! So, go ahead and make small purchases, but do your best to repay in full.
Look for mistakes. Of those who check their credit report, nearly one in five find errors. Check your full credit report at least once per year. If you find an error, report it immediately to the credit bureau and go straight to the lender to have them correct the reporting.
Lighten the load. Avoid using more than 35 per cent of your available credit. Keeping your balance low will improve your credit and will help you avoid excess interest payments. And do your best to make more than the minimum payment.
Remember, nothing is forever on your credit report. Negative remarks will disappear over time, and the positive work you do today will serve you well in the future.
