Question:


After a few family issues and then a sudden breakup a few years ago, I made choices with my money that I probably shouldn’t have made. I have been living with a bad credit rating ever since. I was trying to fix my credit before my current girlfriend found out, but that all changed when we decided to move in together. I didn’t read the rental application when I signed it and the owner checked our credit. His was fine and we got the place, but it was only in his name. She didn’t give me a hard time, but she said she would love to help get my credit rating back on track so we can make plans for our future. What should I do to repair my credit? ~ Jacques

A:

When life arrives, it is not uncommon for our finances to suffer. Whether it’s a drop or loss in income, an illness, a family emergency, a lack of savings, or our spending choices catching up with us, there is a certain many reasons why we could find ourselves in a difficult financial situation. However, as we regain stability in our day-to-day lives, it is important to restore financial literacy that will help us do the same with our finances.

Fortunately, our credit rating is made up of several parts. While this means that there is no one way to fix bad credit fast, it does mean that we have plenty of opportunities to do the right things to fix it. Be careful, however; it takes time. And any business that offers to speed up the process for a fee or with high interest loans won’t be able to do everything that you and your girlfriend can’t do for free. In fact, some of the best ways your girlfriend can help you is by routinely managing your money, sharing expenses, and helping you achieve your goals when the going gets tough. Being accountable to someone will help you make wise choices, but avoid joint debt until your finances are stable again.

To start correcting your credit rating, here are some tips you can take right away:

Make your payments on time, every time

Making your payments on time is crucial to a good credit score. It’s the same when you lend a friend money and they promise to pay you back in two weeks when they get their next paycheck. If they don’t pay you back like they said they would, what is the likelihood that you will loan them money again?

Due to their size, it can be easy to think that your financial institution won’t bother you if you are a little late. You’ve had your bank account there for a decade and you always end up catching up. But nothing could be further from the truth. Lenders like to know that you’ll be quick to repay what you’ve borrowed and meet the terms of the loan you’ve accepted.

What to do now?

While you can’t change the past, making all of your minimum payments on time in the future will start to build a good track record. The negative payment information will eventually disappear from your credit report and that new balance sheet will be what lenders see. Automate as many payments as you can, set reminders in your calendar so you don’t miss due dates and

create a budget that allows for timely payments

.

Be reasonable with the amount of available credit you use

Beyond the calculations that determine how much credit you’ll be approved for, how you use the revolving forms of credit you have available makes a difference. This is often referred to as your credit utilization rate. Revolving forms of credit, such as credit cards or lines of credit, have a different impact on your credit rating than installment forms of credit, such as loans, because of how they work. With revolving credit you are basically approved

Up to

a certain limit, but how much of that limit you use at any given time is up to you.

Using credit makes a difference, as using all of your available credit indicates that bills would go unpaid if your situation worsened. The pandemic has brought this to the fore and lenders are taking a closer look at how borrowers will be able to meet their obligations if their financial situation changes.

What can you do?

Pay more than the minimum if you can. Use a budget and don’t plan on spending the minimum payment the next month. Work to bring what you owe to less than 65% of the approved limit. For example, if your credit card limit is $ 2,000, don’t plan to use more than about $ 1,300 of that limit on an ongoing basis. If you have a lot of bills that are near the maximum limit, choose your best debt repayment strategy and start processing the bills one at a time.

Snowball Or Avalanche – What’s The Best Way To Pay Off Debt?

Don’t apply for more credit than you really need

When you are working hard to repair your credit, it can be tempting to see how you are doing. However, applying for credit that you don’t need will work against you. Rebuilding is a slow and steady process, and applying for new credit too early will be a red flag to lenders. As you take steps to reduce what you owe and make all of your payments on time, creditors will notice.

Still want to check your credit?

If you want to check your own credit to see how you are doing,

request your own free credit report

from each of the major credit reporting companies in Canada. The report you get for free will show where you stand with each of your accounts. It will also include information on how to correct any errors you spot. It will not show your

credit rating

(it’s a paid service), but if your credit report is correct and you’re doing whatever it takes to rebuild your score,

your score will take care of itself

.

Bonus tip! Check your creditors

Checking your own report will also show which of your creditors performed a spot check on the accounts you hold with them. These are called “light hits” and they do not affect your credit score. What they tell you is which of your creditors is monitoring how you manage your obligations to them. They do this for two main reasons: marketing and risk management. Offers for higher limits or new credit products come from the marketing department. When trying to get back on track, the best place for these is often your shredder.

However, letters indicating that your limit has been lowered or that a loan must be repaid in full immediately come from the risk department when they are concerned about your ability to repay what you owe. If you receive such a letter, contact the lender or the company to establish a payment arrangement or to inform them of your situation.

Limits that are lowered while balances are still high can have a detrimental effect on your efforts to rebuild your credit rating. For example, if your credit card limit is $ 10,000 and you have reduced your debt by $ 8,500, you are below the limit and on your way to reducing what you owe. If your limit is reduced to $ 7,500, your balance of $ 8,500 suddenly means your account is overdone. This would have a very negative effect on your credit score. And while this can be quite serious, it also means that if you were going to use the available credit up to $ 10,000 in an emergency, that is no longer possible.

The best tip for getting out of debt?

Include savings in your budget

. Even though you might be tempted to pay as much as you can for what you owe, to stay in control of your situation, set aside some money each month so you don’t have to rely on credit when life does. come. In addition, the savings that you supplement regularly and that are commensurate with your financial situation are viewed positively when lenders assess an application for credit. It shows that you are planning for emergencies, living within your means, and having a balanced approach to managing your money.

Where to find money to save

Deal with debts that have gone into collection

Each credit report has a “public records” section that contains information on unpaid debts as well as judgments registered against you. Public payment methods will also be listed there, such as bankruptcy and consumer proposals. Because this section of your file is only about unpaid debts, if it negatively affects your credit rating.

How to deal with debt collection:

For small debts that have recently been collected, it may be helpful to take the time to contact the creditor, make a payment agreement, and ask them to agree to remove the collection note once your payment has been processed. . utility bills,

parking tickets

and even driving fines are worth paying until the statute of limitations in your province is met.

Once the debts are assigned to a collection agency, it may mean that you are no longer able to deal with the original creditor from whom you borrowed the money. If this is your case, it is important that you understand the debt collection laws in your province of residence. If you are not sure what they are or what they mean for your situation, get help.

before contacting your creditors

.

The Basics on Fixing Your Credit Score

When your credit has suffered and you are working to rebuild your rating, keep an eye out for what caused your financial difficulties. If this was a one-time event, think about what you could have done to avoid it or mitigate its consequences. However, if your difficulties cannot be linked to a particular event, consider

why are you really in debt

. Debt is a symptom of a problem; Only once you understand what caused the problem that you can take steps to avoid it and get out of debt once and for all.

Associated reading:

7 common credit score myths

4 things to do if you owe CERB taxes

Will declaring bankruptcy solve my debt problems?

Scott Hannah is president of the Credit Counseling Society, a non-profit organization. For more information on managing your money or debt, contact Scott by

E-mail

, Check


nomoredebts.org


or dial 1-888-527-8999.

Copyright Postmedia Network Inc., 2021

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