It’s pretty easy to end up with bad credit. Even one missed payment can negatively impact your credit score. Unfortunately, bad credit can make it difficult to get approved for various loans. Whether you’re applying for a mortgage, car loan, personal loan, credit card, or any other type of loan, your credit score will play a key role in determining your approval and ability to qualify for a low-interest rate. Given the importance of your credit score, improving your credit is in your best interest.
What Is Credit Repair?
Thankfully, there are a number of methods you can use to repair your credit. Depending on whether you do-it-yourself or use a professional like a credit repair company, your options will vary.
Whichever option you choose to go with you’ll need to get a copy of your credit report from both Canadian credit reporting bureaus, Equifax and TransUnion. Each of these bureaus has its own way of compiling your credit information so it’s important you have a copy of both.
The point of credit repair is to make sure your credit report and credit score are accurate representations of your financial life as errors or misinformation can seriously damage your overall financial health.
Want to learn how to read your credit report? This article is for you.
What Causes Bad Credit?
A bad credit score can be attributed to a number of different factors in the financial world, like:
- Identity fraud
- Errors on your credit report
- Reporting issues
- Irresponsible credit card usage
- Defaulting on loans
- Consumer proposals
Whatever the cause of your debt problems might be, most of the information goes straight into your credit report, where it can stay for years on end. And with every bad transaction that you make, your credit score will drop along with it.
Irresponsible Credit Card Usage
One of the main causes of debt in Canada is, of course, the credit card. Credit cards are often the first credit product that people apply for and start using regularly. In fact, responsible use of a credit card (i.e. paying bills on time) is a good way of building and maintaining a good credit history. However, using a credit card is becoming easier and more convenient, which is not always a good thing. At most retail locations, you don’t even have to enter your PIN (personal identification number) anymore, as the majority of credit card machines have the “tap” to pay option. And, since you technically only have to pay a minimum monthly fee on your credit card bills to avoid a penalty, it can be all too tempting to do so. Unfortunately, that same level of convenience is exactly why so many people end up with high levels of consumer debt.
If you need to consolidate your credit card debt, read this first.
Defaulting on Loans
Defaulting on your loan payments is right up there with not paying your credit card bills. Even worse in some respects. For example, a secured loan, because secured loans are the kind that involves collateral, a piece of property that might be repossessed to compensate the lender for their loss in the event of a borrower defaulting. Missed car loans and mortgage payments are huge credit killers that plague many Canadians on a daily basis. While one missed payment on a secured loan probably won’t hurt your credit beyond repair, multiple defaulted payments will cause some serious damage. Any repossession will stay on your credit report for 7 years and have a significant impact on your credit score.
How Credit Repair Can Help You
Credit repair can help your credit score by making specific behavioral changes in spending and debt repayment. It can also help by assessing your credit report and rectifying any issues on it that could be unfairly pulling your score down. You’ll work with a trained professional who will perform an analysis, create a plan of action, and then implement their plan. When you choose a credit repair service you’ll benefit from:
- Free credit repair analysis
- One on one personalized help
- A customized credit repair plan
- An improved credit profile and score
- A brighter financial future
Where Do I Get Credit Repair?
Many credit repair services exist that help consumers fix their credit scores and improve the health of their finances. Choosing an experienced and reputable credit repair company could be the difference between improving your credit health and wasting your money. Here are a few of the most important things your credit repair company should provide you with:
- Your rights as a consumer. Your credit repair company should always provide you with the information you need to fully understand your rights as a consumer. If they do not provide you will this information, do not sign any contract until you’ve discussed this with them.
- Enough time to explain your situation. For a credit repair company to be able to help you fix your credit they need to understand what the issues are and why you want to fix them.
- Information on how they will try to help you. A good credit repair company will be able to explain in full detail the process that they will go through in order to help you correct any errors and fix your credit.
However, many of these services come at a cost. The truth is, you don’t necessarily need to pay for these types of services to see improvements in your credit score. There are things you can do yourself to repair your credit for free.
Other Credit Repair Products
|Climb – Accelerator Plan||-Secured savings loan that helps you build credit and save money. |
-Fee of $150 to $250
-Interest rate of 8.99%
|Spring Financial – Spring Savings Loan||-Secured savings loan that helps you build credit and save money. |
-Unsecured loans up to $2,500
-Interest rate 29.8%
|Refresh Financial – Credit Builder Loan||-Secured savings loan that helps you build credit and save money.||More Info|
|-Monthly subscription between $9.99 to $29.99.|
-Payments are reported to credit bureaus
-Allows you to check how your credit gets impacted by certain actions.
Beware of Bad Credit Repair Companies
When your credit scores are low your applications for credit are being denied because of it, bad credit repair companies will try and lure you in with promises of wiping your record clean. Watch out! These are likely scam artists preying on those desperate to get back to financial stability. Canada’s credit bureaus (TransUnion and Equifax) remove or change information on your credit reports if it is inaccurate. You will need to report it as inaccurate and submit a complaint to either one or both credit bureaus.
Is There Free Credit Repair?
Many credit repair companies sell their services to help consumers improve their credit scores. While these services can be helpful, many times the price tag is a little bit much for the kind of help being given.
These companies try to arrange for new credit repair loans that help consumers pay down their debt easier and make the necessary changes needed to give their credit a boost. But some consumers may find it difficult to make the payments on these new credit repair loans.
The good news is that you can repair your credit for free, and often get better results without the assistance of credit repair companies.
Trying to rebuild your credit following bankruptcy? Click here for the solution.
How To Improve Bad Credit Myself?
If your credit is a bit worse for wear, don’t panic, because it is possible to repair it. The key here is to be patient and proactive. If your credit is damaged severely (i.e. a credit score under 500), it’s going to take time and effort to fix it. Even if your credit is currently better than most, it’s never a bad idea to find out ways that you can improve it. Here are just a few of the things that you can do.
Always Pay Your Bills On Time, and Take Care of All Your Other Debts
This is a healthy practice for all credit users and is especially important for those whose credit is already damaged by a consumer proposal or bankruptcy. Keeping up with all your bills, no matter what they are, is the first step you should take. While most utility bills won’t show up on your credit report, a string of unpaid bills could cause those companies to turn your account over to a collections agency. Credit card bills, on the other hand, both paid and unpaid, will definitely be listed on your report. Even some cell phone companies will inform the credit bureaus about unpaid bills.
While it’s important to save money for the future, taking care of your larger debts, like the ones pertaining to your mortgage, car loan, or any of your other assets is more important. Remember, the longer you ignore your debt, the worse the situation will get.
Do Not Apply For Too Many Credit Products
While building a solid credit history is usually better than having no credit history at all, applying for too many credit products all at once is not a good idea. When you or someone else review your credit report, a soft or hard inquiry will be listed there. Soft inquiries occur when someone is performing a background check when considering you for something non-credit related, such as a job (potential employer) or a rental property. The same type of inquiry happens when you yourself request a copy of your credit report. Soft inquiries do not affect your credit report.
However, hard inquiries, which occur when a lender or other financial organization review your report after you apply for credit, do affect your credit score. When a hard inquiry is made, a notice of it will appear on your credit report for 3-6 years, and your credit score will drop by around 7 points in some cases. That’s why it’s important not to apply for too much credit at once.
Consider Getting a Secured Credit Card
If your credit is poor and you don’t qualify for a regular, unsecured credit card, you can apply for a secured card instead. In fact, secured credit cards are often advertised to borrowers who have bad credit. Unlike a normal credit card, a secured card requires a security deposit, usually equal to the desired credit limit, just in case the borrower defaults. The longer the borrower goes without missing a payment, the more their credit score will improve. After a couple of years of responsible usage, they can apply for a regular unsecured credit card and their initial safety deposit will be refunded.
Create a Budget and Start Saving
Learning to budget and save is an important part of your financial health, whether your credit is good or bad. However, it becomes especially important when you’re trying to rebuild your credit. Creating a budget and cutting down on costs should come first. Think about what unnecessary items and expenses you might be able to eliminate from your life. Every penny you don’t spend is a penny you can put into your savings account, then use to pay down your debt.
Fight Any Mistakes on Your Credit Report
Once you get your hands on your credit report, go through it with a fine-tooth comb to see if there are any mistakes on it. Even seemingly insignificant errors can negatively impact your score. Look at things such as:
- Errors in personal information, such as your name, address, and Social Insurance Number
- Errors in your payment history
- Out-of-date account statuses
- Inaccurate account balances
- Past negative occurrences that should no longer be on your report, such as bankruptcies or foreclosures
- Hard credit inquiries that were conducted without your authorization
- Accounts that are listed more than once
Any mistakes that you discover should be noted appropriately.
If you want to know how to dispute an item in your credit report, read this.
Take The First Step to Improve Your Credit Today
If you’re currently struggling to get approved for the financing you need because of a low credit score or issues on your credit profile, we can help by matching you with a credit repair service.