How to Repair Your Credit in 10 Simple Steps

Posted on May 31, 2019

In case you are wondering what’s so bad about bad credit, well for starters, property owners won’t rent to you and 47% of employers check credit ratings of their potential employees.

Getting out of financial difficulty and learning to repair your credit after experiencing money troubles isn't impossible.

Discover how to repair your credit quickly.

Having a good credit not only makes you look good in the books of financial institutions, but it also gives you a great sense of financial soundness. It also gives you a chance to get the best rates and payment terms while taking loans.

Service providers also check your credit score when you want to sign up for their services. This determines if they shall ask for a deposit up-front or bill the service later.

Are You Heavily Indebted? Worry Not. 10 Things Tips on How to Repair Your Credit

Financial irresponsibility or a few bad decisions can leave you in a bad place financially. It can leave you feeling desperate and stunted in terms of self-development.

In case you feel as if you are stuck in a rut and you have a lot to deal with, read on to find out 10 simple steps that can help you repair your bad credit.

1. Know Your Credit Score

Since you are aiming at getting a good credit score, you should first know where you stand financially. This makes it easier to map out your vision and determine the period it will take for you to move from bad credit score to average credit score or from an average credit score to good credit score.

Annual Credit Report provides free credit reports. You can check out your score from reputable credit bureaus. The factors that influence your credit score include your total debt, age, credit utilization ratio, payment history and the type of credit cards you use.

Public records, which touch on your financial situation, also determine your credit score. Hard inquiries, which are presented when you apply for loans, are also factored in when determining your credit score.

2. Make an Agreement with Your Creditors

It is advisable that you communicate with your creditors and talk through the debt and your repayment plan. Creditors normally report loan defaulters and that is how you end up with a dented credit score. However, if you approach them and agree on how to clear the loan going forward, your image improves and you will be among their complying debtors.

You can reach an agreement that will work for both of you. The creditor will eventually receive full payment and you get to pay off the sum in installments that are more manageable for you.

3. Do Not Cancel Your Credit Card

When getting out of debt, it is normal for people to cut out everything that got them into debt. You'd find that many individuals cancel their credit cards. However, it would be best if you do not cancel your credit card because it will reduce your credit history.

Credit-worthiness is best determined over a long credit history and thus, it would be best to use your credit card to improve your credit score. However, some situations may be so bad that loan repayment plans will require that you cancel your credit card, leaving you with no choice but to comply.

To avoid getting your credit card canceled, make routine payments and monitor your spending habits.

4. Pay Your Bills on Time

Moving forward, make an effort to always pay your bills on time. It is good to plan your finances well and to know all the payments that you need to make and their due date. You can then organize your finances to ensure that the bills are paid on time and everything runs smoothly.

It feels good when you don't have constant follow-up calls or emails. Make that call to make payments before they fall due to positively impact your credit score.

5. Get a Secured Account and Credit Card

If you are wondering on how to rebuild credit fast, a solution is having a secured account. It is a more reliable way of proving your creditworthiness within a shorter period. It also enables you to get access to traditional loans and a secured credit card.

Since you may not qualify for regular credit cards, start by getting a secured credit card. Since it has the backing of the amount in your secured account, you can then work on improving your credit score by controlling your spending habits and making payments on time.

Confirm with the credit card provider if the payments made against the card will be reported. As time passes by, you may then request to upgrade to an unsecured credit card. However, if your situation is worse off, you would have to proceed with this with caution since the hard inquiries while filling the forms are more beneficial to your cause.

6. Manage Your Home and Auto Loans

Make an achievable plan to ensure that your payments for your car loan or mortgage are made in good time. Defaulting on such loan repayments makes the financial provider assume that you are unable to clear the loan. In some cases, this may result in foreclosure or repossession of the car.

If you are struggling to stay up-to-date with the repayment plan, approach your lender and ask if you can revise it. You can request to have the monthly amount reduced or the repayment period extended, agreeing on terms which are suitable to both of you.

7. Obtain an Installment Loan

In case you do not have any existing loan, you may shop around for a good installment loan to help you fix your credit score. An installment loan has a set payment and a set term for it to be repaid. Mortgages and auto loans are examples of installment loans.

You can find a good mortgage rate or a car dealer who accommodates clients with low credit scores. Make the loan applications carefully since having many may lower your credit score. Start borrowing small and plan your finances well because such loans may have higher interest rates.

8. Request for Help from Family and Friends

You do not have to struggle alone if you have friends and family that you can count on. You may be a student or in a difficult stage in life and would need some help.

To increase your credit score, you can get help by requesting that your family member or friend who has good credit ratings to be a joint account holder or request that they add you as an authorized user on their credit account.

In case having them as a co-signer may increase your chances in having your loan application approved, request that they help you in that. Show financial responsibility to maintain a good friendship and increase your credit.

9. Be Mindful of Your Credit Utilization Score

Your credit score is negatively affected when you have a high credit utilization score. Calculate your credit utilization score by summing up all the balances of your accounts and dividing it by the sum of all the credit limits and then multiplying the result of this by 100.

It is recommended that you maintain a credit utilization score of less than 30 percent. Therefore, if you have a credit card with a limit of 1000CAD, aim at having a balance less than 300CAD.

10. Seek Financial Counseling Services

There are a number of companies, which specialize in providing financial counseling services. You may hire such services if you have the resources to do so and entrust them to handle your finances and guide you on how you can repair your credit.

Choosing a financial counselor is a task you should do keenly and ensure that the one you select is a certified and trained credit counselor.

How long does it take to build a good credit score?

The length of time taken to improve your credit score will depend on how bad the situation is. Normally, a bad situation can take 2 or 3 months to improve.

However, if the situation was worse off, this can take around 2 or 3 years before a turn-around in the situation is realized.

Stick to the plan you have created and be patient enough to wait for that perfect credit score.

Maintaining a Good Credit Score

After doing a great job and patience of getting yourself out of debt, you ought to maintain this status. Keep working at improving your credit score by practicing all that you learned while getting out of debt. Maintain the good financial discipline of paying bills on time and having good credit utilization.

Always aim to live within your means and never take out loans for something that you can do without. Have an emergency fund which will enable you to be well-prepared to face any unseen circumstance with relative ease, not having to dig deep into your pockets.

You can also get cheap car insurance in Toronto to adjust your financial obligations. Make sound financial decisions which have clear goals and also steer you clear of debt.

Enjoy Financial Stability by Learning How to Repair Your Credit

Having good credit makes most aspects of your life work out in the best way possible for you. You can take loans, get better loan terms and pass recruitment processes. Enjoy a new lease of life, control your spending, control your finances, and enjoy having peace of mind.

Knowledge is power and you can get more information on how to manage your finances.

Visit our website if you would like to get more information on how to repair your credit with a credit card and need to compare the credit card companies in Canada.

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