Common Mistakes with Credit Repair and How to Avoid Them

Common Mistakes with Credit Repair and How to Avoid Them

According to Equifax, the average Canadian owes $73,532 in debt. Debt can be a useful tool when it is used responsibly towards the goal of financial health. However, debt can also be crippling, stressful, and damaging to your financial opportunities.

Having a high credit score is advantageous for a number of different reasons. If you are thinking about buying a house, a car, or otherwise borrowing money in the future, it’s a good idea to check in on your credit report to make sure everything is in good order.

If you are in need of fixing your credit score, there are some mistakes with credit repair you’ll want to avoid.

Let’s take a look at what you need to know about common mistakes people make when trying to fix their credit scores.


Not Doing Your Research

One of the biggest mistakes that people make when it comes to repairing credit scores is not doing the research. The world of personal finance and credit health can be quite complicated. The way to fix your credit is not necessarily intuitive, so it’s important to learn as much as you can.

In general, the more you learn about credit, the better. You’ll want to understand the implications of everything from requesting a credit increase to the consequences of missing a payment.

The basic rule when it comes to credit repair is the more you know, the better off you’ll be. When you increase your literacy surrounding credit repair issues, it can improve your ability to dispute incorrect information. On top of that, it can help you build a bigger picture understanding of how to achieve financial wellbeing over all.

Are you new to the world of credit scores and reports? No worries. Check out our complete guide to your credit score to learn all the necessary basics.


Not Regularly Checking Your Credit Reports

Checking credit reports is a necessary step when you are working to fix your credit score. You can order a copy of your credit report from TransUnion Canada and Equifax Canada. The information that each of these agencies has will not necessarily be the same, so it’s a good idea to check both credit reports.

It’s worth noting that there are not any consequences or effects on your credit score for ordering your own credit report.


Not Keeping All Your Documents

If there is any wrong information on your credit report, you will need to have accurate and complete documentation pertaining to all of your debt. Without this, it can be very difficult to dispute incorrect information. It can also make it difficult to stay within spending parameters that work with your budget.

Contesting incorrect information on a credit report will be much easier when you are able to back up your claims with paperwork.


Procrastinating Fixing Credit Scores

Engaging with the world of repairing your credit probably isn’t your idea of a good time. It can therefore be very easy to procrastinate fixing your credit. However, it’s important that you don’t put off repairing your credit.

After you have ordered your credit report, it’s important to deal with any negative information you find that you believe is wrong right away. Or, if you have damaged your credit over the years and you want to start rebuilding it, the time to start is now.

Rebuilding your credit isn’t something you can do overnight. It’s therefore essential that you start taking steps now. This way, when you need a high credit score to borrow money or for another purpose, you’ll be in a much better position.

At the same time, it’s also possible to do too much when it comes to credit repair. It’s important that you only dispute things that you truly think are incorrect. Otherwise, positive information could end up disappearing from your report or your disputes might not be taken seriously.


Falling Prey to a Credit Repair Service Scam

Unfortunately, there are people and businesses out there that will try and take advantage of those that are in an undesirable financial situation. If you need to take care of credit repair, there is nothing wrong with working with a credit repair service. However, some of these services can be exorbitantly expensive or even downright scams.

It’s important to remember that an offer that sounds too good to be true probably is. If you decide to work with the company to repair your credit score, it’s important to make sure that they are reputable.


Making Balance Transfers

When you are trying to repair your credit, it can be tempting to transfer one credit card balance to another credit card. However, this typically is not a tactic that you should use. At the end of the day, you will still have the same amount of debt plus you will be faced with balance transfer fees.

This can also be the case with consolidating debt onto one credit card. While this can be a reasonable debt management tactic, it isn’t necessarily advantageous for repairing credit. It can be particularly damaging if you choose to close all of the other credit cards.


Closing Credit Card Accounts

It is rarely a good idea to cancel a credit card account. This is because more than one third of your credit score is determined by your credit history. It is generally considered a better practice to keep a small balance on your credit cards and pay it off each month rather than closing the account.

That being said, it’s important to exercise discipline when you have available credit. If you can avoid using credit simply because you have it, having more credit cards and more available credit is better for your credit score.


Missing Payments

One thing you will want to avoid when you are working to fix your credit is missing payments. Sometimes, people focus on paying off one debt to the extent that they miss other payments. Missing payments can seriously hurt your credit, so you want to avoid that at all costs.

There is a caveat to this, however. If a debt has already gone to collections and you have other current debts, it makes sense to take care of the current account before dealing with the debt in collections. The goal should be to keep the current account from going into collections as well.


Applying to Too Many New Lines of Credit

You don’t have a great chance of being approved for new credit if you are already in a position where you are trying to repair your credit. This is particularly the case with unsecured credit. You will end up negatively impacting your credit score with a hard inquiry right when you are focusing on making your credit better.

The better option is to wait until your credit has improved before applying for new lines of credit.


Filing for Bankruptcy

Filing for bankruptcy is often seen as a way to get a fresh start. However, bankruptcy will stay on your credit report for several years. How many years it remains on your report depends on the credit bureau and the province you live in.

Even after bankruptcy is no longer on your credit report, it can end up impacting your ability to borrow money in the future.


Not Utilizing Secured Credit Cards

One way to improve your credit that many people don’t think about is getting a secured credit card. Secured credit cards are easier to get approved for because you pay money upfront rather than owing money in the future. Keeping a secured card in good standing is one of the most straightforward tactics you can use to improve your credit and build your credit history.


Paying Money to Debt Collectors

You might assume that it is better to pay off all of your debts in order to improve your credit. However, if you have a debt that is in collections and has outlived the statute of limitations, it could actually update the debt to make a payment on it.

Don’t pay off old debt until you’re sure that the debt is valid and current. Debt collectors are very skilled at intimidating people into making payments. Rather than being convinced by their verbal communication, look at what the written documents say before deciding whether or not you should make payments.

Dealing with a debt collector can be incredibly stressful. You can learn more about having a debt in collections here.


Avoid These Mistakes With Credit Repair

Figuring out how to fix your credit can be a stressful process. However, with careful attention and discipline, you can repair your credit score over time. There are countless benefits to having a high credit score, so it’s important that you work towards rebuilding your credit if it has fallen below a desirable number.

That being said, there are also mistakes with credit repair you will want to avoid making. This list is a good place to start when you want to research what you should not do when it comes to improving your credit.

If your credit report has seen better days, don’t fret. If you’re rebuilding your credit after bankruptcy, check out this guide today.

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Get your online loan, paperless & fast.

Quick Personal Loans for Canadians :

  • No credit investigation
  • No documents required
  • Repay in up to 90 to 120 days
  • $500 short-term loans