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Published on September 29th, 2009 | by Canadian Credit Expert


Repair your Bad Credit

Fix Damaged CreditRepair Bad Credit

In Canada bad credit can hurt your credit score, lead to bankruptcy, end your career and in some cases even cost you a marriage. If you think for a second that you have a bad credit history then you have a responsibility to yourself and your creditors to investigate and try to repair the problem.

Often credit problems are self inflicted but there are times when bad credit is cause by external forces, such as the economy or a sudden life changing event. While it might be unfair, you are always obligated to pay your debts and keep your loans up to date, no matter who is at fault.

While consumer credit and credit problems can sometimes be unfair, there is still a bright side. If your personal or financial life takes a turn for the worse and your credit suffers, you can fix your credit and recover. If you default on your loans, stop paying your credit card and damage your credit history – there is fairness and hope.

The fairness lies with the opportunity for anyone, no matter how bad their credit is, to repair their credit. If you make a mistake or a poor credit decision, you have options.

Keep reading and learn how you can catch up, even if you fall behind.

Find the Problem

Before you can fix your credit, you must first determine the cause of your credit problems. The best way to identify credit problems is to check your credit history and get familiar with your payment history and outstanding debt. You can check your credit history and credit score by pulling your Canadian credit report.

If you’ve identified bad credit on your credit file and the issues are self inflicted, then you need to look at why and find out what the root cause is.

Here are some important questions that you should ask yourself:

  • How many credit cards do I have?
  • Do I make my payments on time?
  • What are my spending habits like?
  • Do I have bad financial habits?
  • Do I rely on my credit too much?
  • Can I afford all of my payments?
  • Do I have joint loans with anyone?
  • Do I understand the terms of each loan I have?

Banks and finance companies base a lot of their credit decisions on affordability and they do this by reviewing the total debt service ratio for each of their applicants. If you compare your monthly income to your monthly debt, you can determine if affordability is causing your credit issues. Do this by adding up all your debt and see how it stacks up against your income. Like many Canadians, the problem could be that you’re spending more than you’re making.

Stop the Problem

Once you’ve determined the cause of your credit issues and reason you’re struggling with bills and missing payments, its time to take action and stop any further damage to your credit.

In most scenarios, this is easier said than done. Often credit problems spiral out of control, putting the debtor in a position where their debt continues to rise while their income remains the same.

Thankfully there are certain steps that anyone with credit problems can and should take:

  • Cut Back on Spending – If you’re spending too much, cut back on what you don’t need. Any savings from this should go towards late payments or bad debt.
  • Reduce Credit Card Balances – If you’re carrying high credit card balances or you’re over your limit, bring it under control. Try and maintain a balance of 75% of your credit limit or less. This shows creditors that you are not over capacity.
  • Bring Payments Up to Date – If you’re behind on loan payments, catch up.
  • Close Extra Credit Cards – If you’re not using a credit card, write to your creditor and ask them to close it. Having a lot of open credit cards can do more harm then good.
  • Contact Your Creditors – If you’re struggling with your credit or you’re ignoring collection calls, stop. You gain credibility and in some cases help from your creditors just by staying in touch and showing that you’re trying to fix the problem.
  • Stop Applying for Credit – If you have a habit of applying for credit, stop. Every time you apply for a loan it is recorded on your credit bureau as an inquiry. Having too many credit inquiries on your credit file can label you as a credit seeker, which banks consider a risky customer. Instead of filing out multiple credit applications, apply only when necessary.

Fix the Problem

So you’ve stopped your credit problems from getting worse. That is a great step but it’s not your last. Depending on how long you’ve been struggling with your credit, you could have done significant damage to your credit score or accumulated collections that are registered to your credit bureau.

Here are few important steps that can immediately help get your credit under control and have a positive impact on your credit score:

  • Catch Up – If you haven’t already, bring any arrears you have up to date and make sure none of your loan payments are past due.
  • Pay Up – If you have any unpaid collections or court judgements, settle them. Often creditors will be willing to negotiate a settlement at a small loss in exchange for receiving payment. Creditors prefer collections that report as paid because it shows effort.
  • Correct Errors on your Credit Bureau – When checking your credit, it’s important that you immediately report any errors you notice to both Canadian credit bureaus. Mistaken information can be as simple as a misspelled street address or as sinister as a fraudulent loan reporting on your credit . Having an up to date and accurate credit file is important.
  • Negotiate with Creditors – If you can’t afford your car payments, you need an extension for your next payment or your interest rate is too high, ask for help. In Canada many creditors are willing to work with struggling customers. There are even occasions where you can refinance a car loan, consolidate loans and even lower the interest rate on a loan. It never hurts to ask…so ask!

Time and Patience

In Canada inactive information on a consumer credit bureau and credit history is erased after 7 years. This means it is possible for a consumer with an auto loan repossession and credit card write off in 2009 to have a credit file free of derogatory credit by the year 2016.

While waiting 7 years for poor credit history to be withdrawn from your credit bureau is effective, for many people it is not an option. 7 years is a long time to wait. There are fortunately ways to combine time with action and turn bad credit into good credit.

Here are some of the many ways to actively fix bad credit:

  • Bankruptcy – Filing a bankruptcy can clear your debt in 9 months. If you reestablish credit after a bankruptcy, banks might consider you again. This also applies to a consumer proposal, which can last as long as 5 years.
  • More Credit – If you can obtain a bad credit loan such as a subprime car loan or an equity loan you can start rebuilding credit by making your payments on time. After time the good credit can outweigh the bad credit.
  • Secured Credit Card – A secured credit card is available to almost anyone, no matter how bad their credit is. Obtaining and maintaining the payments on a secured credit card can help turn around your credit rating.
  • Maintain Payments – Bringing your late payments up to date and keeping them up to date can be the start of a positive payment history, which can turn around a credit score.

Those are just a few of the many ways to help rebuild credit and repair damaged credit. Although there is no easy get out of jail secret for fixing bad credit, there are proven methods that help.

Remember the best thing you can do if you’re struggling with your credit is to get the problem under control and prevent further damage.

Before you set your sites on fixing your credit or decide to apply for additional credit, get the facts and check your credit!

Thank you and good luck – Any Bad Credit Canada

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About the Author

The Canadian Credit Expert most recently worked in sales financing for a major bank in Canada but has done everything from working at a new car dealership to collecting on past due loans for a Canadian auto lender.

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