A credit score is not just an arbitrary number linked to you by credit agencies. When you have poor credit, it can serve as a deterrent to securing car loans, great credit cards, mortgages, and school options for your children. It can also significantly hike interest rates, putting you in the red and prevent you from achieving your life goals.
Many Canadians are privy to the fact that a good credit score is important. According to a national poll, most Canadians don't seem to realize how ubiquitous their credit score is, and how it influences many essential facets of their daily lives. Employers may check your credit score when you're applying for a job, and cell phone companies may also look at your score during the application process. It also holds weight if you're a small business owner hoping to secure a loan.
If you managed to hurt your credit score by missing credit card payments, maxing out cards, or defaulting on loans, know that it's not too late. There are still steps to rebuilding your credit so you can bounce back. It just takes time, effort, and dedication on your part.
Check your credit score.
Before anything else, you must first check your credit report to find out the factors that are pulling your credit score down. That way, you'll be able to create a specific action plan to address those areas of improvement. In Canada, 750+ is considered excellent credit, 700-749 scores are deemed as good credit, while scores of 650-699 are of fair credit. Meanwhile, scores of 600-649 are seen as poor credit and below 600 scores are bad credit.
Make arrangements to pay down debts.
The biggest contributor to your credit score is payment history. If you're behind on payments, your credit situation won't improve. If you find that you still can't make payments on time or can't afford to bring your delinquent accounts up to date, you may contact your creditors to negotiate a payment arrangement that works for both parties. They may agree to work out an arrangement that can accommodate your budget.
Open a secured credit card.
If you have poor or bad credit, creditors see you as a risk, so you can only open secured credit cards. It works just like any other unsecured credit card, except that you have to provide a security deposit as a form of collateral before you are issued the card. When you're using your secured card, you need to be careful as your spending and paying activity coveys to your creditors whether or not you can handle credit responsibly.
Make minimum payments by the due date.
Part of rebuilding credit is making payments on time on both credit and non-credit bills. A missed utility payment or outstanding phone bill can get reported to credit bureaus and affect your credit score. At the very least, you should make at least the minimum payments on time. A good tip would be setting up reminders so you can get notified when it's time to pay. Remember that late and missed payments will count against you, so you must be diligent in paying the minimum on time.
Rebuilding your credit is tough work, but it can be done as long as you make an effort and commit to making progress. Of course, part of it is also adopting good spending habits and only living within your means.
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