Rebuild Your Credit With These Programs

If you have bad credit, you’re not alone. Plenty of consumers across Canada suffer from poor credit that is hindering their financial freedom. But while bad credit can definitely put a damper on your ability to get approved for new credit, it doesn’t mean you’re stuck with it forever.  

No matter what position you’re in, there are ways to improve your credit scores, including a variety of credit-building programs. 

Credit Building Programs In Canada

If you have a bad credit score, there are programs available that can help you rebuild your credit:

KOHO Credit Building Program

KOHO is a fintech company in Canada that offers an easy and hands-free way to build credit. When you subscribe to KOHO’s Credit Building Program, they’ll open a line of credit for you to help you build a positive payment history. 

What Is The KOHO Credit Building Program?

KOHO’s Credit Building Program is a 6-month program that has a $10 monthly fee. KOHO will open a line of credit in your name and you’ll make monthly payments toward your line of credit. All your payments will be reported to one of the major credit bureaus in Canada. If you have really bad credit, you may want to consider subscribing to the program multiple times in order to build a longer and more positive payment history. The more positive your payment history, the more likely it’ll help build your credit scores

How To Apply For KOHO’s Credit Building Program? 

In order to be able to subscribe to KOHO’s Credit Building Program, you’ll need to: 

• Open A KOHO Account – To access the KOHO Credit Building Program, you’ll need to first sign-up for the KOHO spendable account. The KOHO spendable account is a free prepaid Mastercard that can be used to make purchases while earning cash back. You are required to open this account as it will be used to automatically withdraw your monthly subscription fee. 
• Fund Your Account –  Be sure to fund your account with enough money to cover your subscription fee. Insufficient funds can lead to NSF fees. 

Billi Boost

Billi Boost is a unique credit building feature of the Billi app. With it, you can use your monthly rent payments to help build your credit instead of having to take on new loans, credit cards, or other products that cause debt. Billi Boost keeps track of your rent payments and reports them periodically to the credit bureau. 

In fact, Billi Boost helps automate your rent payments by providing you with reminders to pay your rent so that you’re never late. 

While the Billi app is free, keep in mind that there’s a monthly fee of $4.99 to use Billi Boost. Additionally, it can take about 4 to 6 months to see your credit score increase.   

How Does It Work?

It’s very easy to use Billi Boost to help you build credit. All you have to do is follow these steps:

1. Download the Billi app on your smartphone or mobile device, then create your profile by sharing some details about yourself on the Billi Boost application.

2. Connect your bank account so Billi can locate your rent payments and report them to the credit bureau (split rent or payments made by cheque, e-Transfer or cash are also accepted). 

1. Keep making your rent payments on time to help build your payment history, which can help improve your credit scores.  

Credit Building Savings Loan

If you’re looking to borrow money while improving your credit scores at the same time, you might find yourself getting rejected for different loan products. In this case, a credit building savings program may prove to be helpful. These programs are designed to help consumers build or improve credit and are ideal for those who’ve experienced past financial hardships that have led to poor credit scores.

What Is A Credit Building Savings Loan?

A credit building savings loan (sometimes referred to as a credit building program) allows you to make low weekly payments to the program provider. The provider will report all your payments to the major credit bureau(s). As you continue to make timely payments, you’ll build a positive payment history which can help improve your credit scores. 

It’s important to remember a credit building savings loan is not an actual loan. Rather you make payments to the provider for a certain number of months. Each payment is stored in a trust and is given back to you at the end of the program, minus any interest and fees. Through the program, you’ll be able to build credit and save money. 

Credit Building Savings Loan Programs

Secured Credit Card

It can be tough to get approved for a traditional credit card with bad credit. Secured credit cards, on the other hand,  are much easier to secure because all you need to do is provide the minimum security deposit, which can start as low as $50. So long as you can provide the security deposit, you’re pretty much-guaranteed approval. 

How Does A Secured Credit Card Work?

Secured credit cards work just like regular credit cards, except you’ll need to provide a sum of money as security. Often, although not always, your security and credit limit will be the same amount.

As you make payments, the lender will report them to one or both of the credit bureaus. This, in turn, will help you build a positive payment history which can positively impact your credit scores. The main drawback to secured credit cards is their lack of perks. Unlike a regular credit card, there’s usually no point system or added perks like travel insurance.

Best Secured Credit Cards

Credit Counselling

Credit counselling is a service offered by both for-profit and non-profit companies to help individuals get back on track with their finances. These programs offer debt relief solutions through education, budgeting, and guidance. They also offer ways to ultimately reduce and even eliminate debt altogether.

How Does Credit Counselling Work?

Credit counsellors generally work by reviewing your overall finances. They will evaluate your income, debt, and savings goals to create a budget for you. However, sometimes more extreme measures are required. In certain cases, credit counsellors may recommend a debt management program or that you speak to a Licensed Insolvency Trustee to discuss a consumer proposal or even bankruptcy. 

Credit Counselling Companies

Credit Repair 

Companies associated with credit repair work by obtaining your credit report and communicating with creditors on your behalf to get rid of any black marks on your report as soon as possible. However, it’s important to note that only negative remarks that are actual errors can be removed. The removal of such negative notes can have a positive impact on your credit scores.

Should I Work With a Credit Repair Company?

Credit repair companies can help build your credit, but they cannot do anything you can’t do on your own. They simply help you read your report and file disputes on your behalf for a fee. 

How Do Credit Scores Work? 

Credit scores range from 300 to 900, with scores closer to 300 being poor and scores closer to 900 being excellent. Credit scores are used by lenders to evaluate the likelihood that you’ll make your payments on time. A higher credit score generally means the borrower is less of a risk and will be more likely to make timely loan payments every month. 

There are five factors that generally affect the calculation of credit scores: 

• Payment History – Perhaps the most influential factor is a person’s payment history. It takes into account missed or late payments, how long they were overdue, and how often.
• Debt-To-Income Ratio – The amount of credit you’ve used versus how much you have available may play a role in your credit score calculations. 
• Credit History – The age of your credit accounts can also impact your credit scores. On average, it accounts for around 15% of your credit scores.  This is why it’s typically recommended to keep old credit accounts open, even if you’re not using them
• Credit Inquiries – When you apply for new credit, the lender will pull your credit report, which is known as a “hard” inquiry. This can have a negative effect on your credit score, even though it may only be temporary. Further, applying for a number of different credit accounts within a short period of time can also be bad for your score.
• Public Records – This typically accounts for around 10% of your credit score calculation. It takes into account a variety of derogatory remarks such as bankruptcies, consumer proposals, tax liens, and accounts in collections. 

What Causes Bad Credit? 

There are a number of reasons why your credit scores may have fallen. These are some common reasons that can cause your credit scores to drop:

• Missing Payments  – If you have a habit of making late payments or missing them altogether, your credit scores can be negatively impacted. As mentioned, your payment history accounts for around 35% of your credit score, so a poor payment history can significantly and negatively impact your credit. 
• Maxing Out Credit Cards –  Maxing out your credit cards can affect your debt-to-credit ratio, another big factor that can affect your credit scores.
• Job loss – While your spending habits certainly play a role in your credit score health, certain things can happen that are out of your control, such as the loss of a job. Job loss has an indirect impact on your score because a number of things can come out of this situation, such as falling behind on credit card payments as a result of not having enough money.  

Reduction In income – Like job loss, getting a pay cut can influence your ability to afford the payments you’re already obligated to make. This can lead to missed payments which could lead to lower credit scores.

Additional Reading

What To Do If You Have A Zero Credit Score?

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New Immigrants: Establishing Credit

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Switching From a Secured Credit Card to a Regular Credit Card

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Bottom Line

If you’re looking to build credit from the ground up or rebuild your credit, there are plenty credit-building programs for you to take advantage of.  Just remember, there’s no guarantee that any one product will improve your scores. Credit scores fluctuate for a number of reasons, just be sure to make a consistent effort to build it.