What can I do to improve my credit worthiness?

How to Re-establish Credit

Regardless of how you ended up with bad credit, you can get out of your credit problem if you work hard. You must be able to show that in spite of previous debt problems, you can now handle credit in a financially responsible manner. You should generate a large quantity of positive information on your credit report to counterbalance the bad stuff. It’s time to get up and do something positive about rebuilding your finances and your credit report. But you won’t get out of trouble overnight.

Re-establishing your damaged credit is a slow and painful process. If you, however, work at rebuilding your credit patiently and persistently, your reestablished credit would come sooner. Here are crucial steps you can follow:

  1. Pay off your debts
    One of the best ways to get your credit rating back is to begin paying of your debts.  Start with any liens or judgments against you.  There are two main strategies in paying off your debts: you may pay off either smaller debt first or high-rate debts first.  You may also consider debt consolidation loan.
  2. Devise a plan to manage your money
    Learn how to control your spending.  Often people develop financial problems because they overextend their credit use.  Analyze your spending habits, create financial goals, and set spending priorities. A copy of our 4 Step Financial Fitness CD will help with this.
  3. Pay with cash
    If you still have your credit cards, get rid of all but one or two cards after paying off your outstanding balances.  Prospective creditors will see that you intend to use credit more carefully in the future.
  4.  Check your credit reports
    You should know exactly how bad things are.  Order a copy of your credit report from each of the two credit bureaus.   Once you get a report, check it over carefully to see what kind of information it contains.  If you believe that there is an error in your credit report, write the credit bureau and fill out a dispute form.  Also update any outdated information on your report.
    Correct and update incorrect information on your credit report and submit a 100-word statement to tell your side of the story if you had a problem.
  5. Apply for a secured credit card
    Getting a regular credit card is difficult when you’re saddled with bad credit rating.  A secured credit card is an excellent way for someone with bad credit or no credit history to quickly build a good rating.   Although secured credit cards tend to have higher interest rates and higher annual fees than regular cards, they do provide a valuable stepping stone. Call us as we can help you with this at no charge to you. 
  6. Apply for a retail card
    A local department store may be more likely to issue you a charge card than a major credit card issuer.  If you cannot get a department store card, you may be able to begin by purchasing an item on a layaway plan.  When you show that you are reliable, the store will be more inclined to provide you with a charge card.
  7. Pay your bills on time
    This is the most important.  Once you get a secured card or retail card, don’t forget to pay your bills promptly.  It may take from one year to 18 months of paying your bills on time to reestablish a credit rating that shows that you now have control of your spending and can be considered a good credit risk. (If you have filed for bankruptcy this process can take longer, but the previous steps should be followed nonetheless.)

It takes time and there is no quick fix for eliminating past aspects of your credit history that may be negatively affecting your credit score. Here are some illustrations of the examples of creditworthy behavior:

– Pay all of your bills on time. Paying late, or having your account sent to a collection agency has a negative impact on your credit score.

– Try not to run your balances up to your credit limit. Keeping your account balances below 75% of your available credit may also help your score.

– Avoid applying for credit unless you have a genuine need for a new account. Too many inquiries in a short period of time can sometimes be interpreted as a sign that you are opening numerous credit accounts due to financial difficulties, or overextending yourself by taking on more debt than you can actually repay. A flurry of inquiries will prompt most lenders to ask you why. However, most scoring formulas will not penalize you if, for example, you are shopping for the best mortgage rate or the best car loan.

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