Credit Watch

How to Repair Your Credit and Improve Your Score

Credit Score is the method used by financial institutes to measure your financial health at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers. In Canada, credit history is recorded in files maintained by at least one of Canada’s three major credit-reporting bureaus (Equifax, TransUnion and Northern Credit Bureaus Inc.). These files are called credit reports – a “snapshot” of your credit history.

There is a rising tide of spam offering “credit repair” for a fee. Beware of these companies; their ability to change the information that appears in your credit file is no different than anyone else’s! Only your creditors are able to alter this information. Therefore you do not need to pay a third party to obtain, review or make changes to your credit report. You have the right to access your information and make changes to your file if there is an inaccuracy.

What should you do if you have bad credit?

Before you pay someone to advise you how to fix your credit, check out these simple steps to help you build a better credit rating:

1. Request a copy of your credit report from the three credit-reporting agencies at least once a year to verify that your personal information is up to date and your financial information is correct, and to ensure that you have not been the victim of identity fraud. Because your credit information can be kept by more than one credit-reporting agency, and because those agencies do not necessarily share information, it’s important to check all three credit reports carefully. You can get a copy of your credit history from the above agencies websites for a small fee.

2. Check your credit history thoroughly. Look for errors and make sure the information in the report is correct and up to date. If you believe that the information in your credit report is incorrect, contact the financial institution that reported the information to see if an error was made. You could also file a dispute with the three credit-reporting bureaus explaining your situation.

3. Analyse your finances.  Make a list of everything you owe, the interest rate each debt carries, and the minimum payment due each month. Then, prioritize your debt: mortgage, real estate taxes, credit cards and bills should be paid in that order.

4. Negotiate with your creditors for a lower interest rate.

5. Pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some companies may report late payments to the credit-reporting agencies, which could affect your score. Try to pay your bills in full by the due date. If you aren’t able to do this, pay at least the required minimum amount shown on your monthly credit card statement.

6. Try to pay your debts as quickly as possible. The faster you pay your loans the less interest you will pay in the long run which means more available money to pay other bills.

7. Don’t go over the credit limit on your credit card. Try to keep your balance below 25% of the limit. The higher your balance, the more impact it has on your credit score. You’re better off spreading out your debt between three or four different cards than having it all piled on one card.

8. Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.

9. Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card.

10. Don’t share credit (except with a spouse).  Think carefully before you agree to co-sign a loan. It is easy to wind up in a situation where that friend or relative stops paying his or her bills (for whatever reason) and your credit will take a big hit. Once you’re a co-signer for a loan, you’re legally obligated to make those payments, whether or not you can afford them.

Show the credit system that you are a responsible money manager. A bad mark on your credit report will remain on your credit record for a maximum of 7 years. Pay your bills on time. Don’t bounce any cheques. Don’t overdraw your account at the bank (even if you have overdraft protection). You should only borrow money because you want to, not because you have to.  In this way you will repair your credit and avoid a bad credit report in the futur


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