Life happens. And it happens quickly. It can feel as if you woke up one morning and suddenly your credit score won’t allow you to get a cell phone, buy a car or rent an apartment. A missed bill payment and relying on your credit card too much are just a couple of things that can drop your credit score.
If bad credit is holding you back from getting approved for a loan, mortgage, insurance policy or even a job offer, the following six tips can help you raise your credit score.
Get a Copy of Your Credit Report
You know it’s bad, but to solve any problem, you need to know what you’re facing. Reviewing your credit report will show you which accounts are pulling your credit score down and which issues are most important to deal with first. If a maxed-out credit card or being behind on a bank loan is most important, you know where to focus your energy.
Reviewing your credit reports regularly is also important to help you confirm that the information on them is correct and that there are no fraudulent accounts in your name. Either of those two scenarios could be destroying your credit without your knowledge.
There are two main credit bureaus in Canada, Equifax and TransUnion. Not every lender reports to both, so you need a report from each of them to have a full picture of your credit history.
Each company will send you one free copy a year of your credit report, but it will not include your credit score. If you want to see your credit score or review your credit report more than once a year, you’ll have to pay them to do so.
A better option is to check your credit score online for free. Companies, like Toronto based Borrowell, are pushing the envelope forward by allowing consumers to have information on hand about their credit scores. With Borrowell’s services, you can have unlimited access to your credit report and score, all without actually affecting it. A bonus is that their tech also gives you tips on how you can improve your credit health.
Get In Touch With Your Creditors
Usually, a bad credit score is a result of falling behind on payments. We all make mistakes or go through rough times. The thought of calling creditors or collection agencies can be intimidating, but it’s better than not doing it.
Once you’ve looked at your credit report and decided on a plan of action, contact your creditors and arrange for a payment plan that will realistically work for you.
You may be in the situation that you’re not able to make payments at all. There are non-profit credit counseling services that can help – but be careful, there are some credit counseling services that are for-profit and not trustworthy.
This Government of Canada’s webpage has provided links to associations that can help you find the right agency:
- Credit Counselling Canada
- Canadian Association of Credit Counselling Services
- Canadian Association of Independent Credit Counselling Agencies
- Ontario Association of Credit Counselling Services
Make sure you visit this Government of Canada page as well. There is a lot you should know about credit counseling agencies before signing up with one, including:
- Companies and agencies can’t guarantee that they can solve your debt problems
- They can’t quickly and easily fix your credit score
- They shouldn’t advise you to take out a high-interest loan to pay off your debts
- Some companies misrepresent themselves as being a government service
Pay Down Your Credit Accounts
It’s not a good idea to carry a balance of more than 30% of your credit limit on any credit account. The credit bureaus use your outstanding credit compared with your available credit as a factor in calculating your credit score which is called your credit utilization rate. Having a high balance also means paying more money in interest – which keeps you in debt much longer. Making more than one payment per period will help bring the balance down faster. If you’re not able to do that, re-visit your budget and look for ways to save money so you can increase the amount you’re paying towards your bills.
Don’t Fall Behind
Once you’ve made payment arrangements, make sure you don’t fall behind because of forgetfulness. Setting up reminders on your phone or on a calendar and creating automatic withdrawals through online banking are good ways to help you stay on top of your payments. There are also new apps, like Borrowell Boost that can help you keep track and send notifications right to your phone so you can avoid missed or late payments.
Get a Secured Credit Card
If you’re back on track with your payments and can save some money, using that money as a deposit on a secured credit card is a good way to start rebuilding your credit score.
The money you use to get a secure credit card is held as collateral in case you don’t pay the balance. You still have to make your payments, but using and paying your secured credit card every month shows that you can responsibly manage your bills again and can improve your credit score.
Find Ways to Budget
Every dollar is probably already stretched, but sitting down and creating a monthly or weekly budget can show you areas where you might be able to save a little more money. There are plenty of tips online about saving money on your monthly expenses.