Published on September 26th, 2010 | by Canadian Credit Expert1
Can you Fix Bad Credit in Canada?
Repairing Bad Credit in Canada
In Canada a bad credit history can haunt you for years and limit your chances of getting a car loan, using a credit card or getting a mortgage. A bad credit score can literally put your financial life on hold.
Unfortunately there is no quick way of erasing or washing away your credit history in Canada. You can however take steps to isolate your credit problems and repair your credit. Bad credit can be compared to a wound and before a wound heals, it first has to stop bleeding.
To stop the bleeding you must first determine the source of the wound. The best way to identify your credit problems is to first check your Canadian credit report. There are two major credit bureaus in Canada: Equifax Canada and TransUnion Canada.
Here are some suggested steps that might help you identify, correct and then repair your bad credit history. Please remember that Any Bad Credit Canada is never a substitute for the professional advice of a credit counselor, financial advisor or trustee in bankruptcy.
1) Identify & Isolate the Problem – First check your credit report by pulling your credit file and obtaining a credit score. You can check your credit by visiting Check Your Credit First Canada.
Once you’ve obtained your credit report, the first thing you should do is confirm that the information on your credit file is correct. If it’s not, then you should immediately get in contact with both Canadian credit bureaus and tell them about the credit discrepancies you found.
Obtaining your credit report gives you full access to your credit score and the credit history available to all the institutions you apply at. Once you have it, it’s time to find out what (if any) credit problems you have.
2) Correct the Problem – If you’ve identified bad credit on your credit bureau, it’s now time to correct it. In order to “stop the bleeding” you need to take action.
If you’re over using your credit cards then you need to stop, if you’re making your payments late then you need to call your creditors and negotiate a repayment schedule and if you’re just being forgetful then you need to get organized and start making your payments on time. This is serious business if you’re being lazy or forgetful, its time to smarten up!
3) Know your Options – Part of knowing your options is also knowing your limits. If you’re unable to make your past due payments, negotiate a repayment schedule with your creditors or manage the debt you have – then correcting the problem might involve options, such as filing bankruptcy or consumer proposal. So get familiar with the options available to you. If bankruptcy is on the table its very important you read and understand bankruptcy law in Canada.
4) Take Action – After you’ve carefully reviewed all the options available to you and consulted with a professional such as a trustee in bankruptcy it’s time to take action.
Action to repair your credit might involve consolidating your loans, refinancing your house, borrowing more money, taking out a new loan, making a consumer proposal, curbing spending or filing bankruptcy.
One of the best ways to repair credit or rebuild credit is to take out another loan and prove that you can pay it well. It’s not wise to take out a loan that you don’t need it, especially if you have current credit problems, but sometimes financing something you need can also be helpful for your credit score.
If you need a car, then getting a car loan and maintaining its payments can help fix your credit. If you finance a car and you make your car payments on time every month for 1 – 2 years, not only will your credit bureau show that positive history but your credit score will also increase.
The number of payments, size of the loan, type of financial institution and other factors are all considered but the general rule of thumb is this:
A strong trade line (such as an auto loan) paid well on a credit bureau, will strengthen a credit score.
There are several proactive ways to fix credit, some better than others. Please remember to choose your actions carefully and before you make any major financial decisions consult with a qualified professional that you are comfortable with.
5) Be Patient – A major part of the credit repair process is patience. Credit history, bad credit trade lines and bankruptcies all remain on a credit file for 7 years. That does not mean you will need to wait 7 years to fix your credit or apply for more credit. It simply means that your credit problems will be visible to anyone who pulls your credit file during that period.
If you isolated your credit problems and took appropriate action towards them, then the final step is a little patience.
Repairing credit is not a simple task and involves discipline, education and often help. For a more detailed guide to repairing credit check out our Repair Your Bad Credit article. Learn more about total debt service with our TDSR and Car Loans article.