Better Credit Score

A few simple ideas to fix bad credit…

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You went over the credit limit on your credit card, forgot to pay your cell phone bill a few times, or racked up lots of debt – whatever the reason, you now find yourself with a bad credit rating. And because of your bad credit, getting financing is difficult. You want to buy a car but can’t get a loan through the car dealership. One credit card application after another is denied. After much searching, you finally find a company willing to lend you money, but the interest rate is much higher than expected.

You get a letter in the post from a company offering to re-establish your credit for a fee. But there’s nothing a credit repair company can do for you that you can’t do yourself. Here’s how you can start to increase your credit rating/score (FICO score):

1) Get a copy of your credit report from a recognized credit bureau.

In Canada, Equifax (1-800-465-7166) and TransUnion (1-800-888-4213) are the two main credit bureaus.

2) Review your report to make sure the information is correct.

If you’ve already paid off past bad credit, check that the credit has been removed; you can request a change to your file if there is an inaccuracy. If there are negative comments on your credit report, you can respond to those comments.  If you still owe money to a creditor, repay that amount and then request that the creditor remove any negative credit or comments from your report.

3) Pay off debt, starting with high interest credit / loans.

If the reason for your bad credit rating is that you have lots of debt, then you should start by paying off the high interest rate debts. Lenders may be reluctant to extend credit to you if you already owe other lenders a lot of money, even if you’re managing to make the regular payments. As a rule of thumb, you should try to limit debt to 30% of your credit limit.

4) Get new credit.

It’s counterintuitive, but sometimes the problem can be that you haven’t established a positive payment history by owning a credit card that you’ve paid off regularly. Your credit problems may have left you swearing off credit cards, but using a credit card properly can help re-establish your credit rating.

If your credit score is low, you may have trouble getting a credit card from a major bank, but you could apply for a department store or gas card. Alternatively, you could ask a family member or good friend to co-sign the application.

Use the new credit card to make purchases that you’re able to pay back fully each month. This will avoid interest charges and help boost your credit score.

5) Call the lender.

It isn’t always easy to work up the courage to call a creditor to explain why you’re having trouble making payments, but if you show that you are willing to face your debt problems, lenders may be more willing to help find a solution.

If you have a bad credit rating, don’t panic but start to deal with the situation using these steps. Don’t leave it until you desperately need more credit. Eventually, you should be able to bring your score to a level that qualifies you for loan approval and better interest rates.