The Complete Guide to Repairing Bad Credit

Did you know that the average Canadian credit score went up during the COVID-19 pandemic? This is great news for many Canadians, but if you found yourself struggling, you may not be in this position.

Having a low credit score is a serious barrier to your financial health. Repairing bad credit scores is a challenge, and if you’re in need of a loan, a mortgage, or a rental home, you don’t have a lot of time.

We’re here to offer some advice to get you started. Read on to learn all about improving credit scores.


Why Do You Need to Repair Your Credit Score?

Many people who are struggling with their credit scores end up putting them on the back burner. With so many things to pay for, why prioritize improving your credit score when you’re already struggling with money?

A low credit score will put you at a disadvantage when you’re applying for loans, rentals, and more. Lenders and landlords use credit scores to determine whether or not you’re going to be reliable and make payments on time.

A good credit score can save you money in the long run. You may be able to get better interest rates on mortgages, higher-quality apartments or rental homes without the need for a cosigner or paying more upfront, and access to better credit cards with more rewards.

If you’re not paying attention to your credit score, you’ll ruin your financial health. It doesn’t have to be perfect, but it should be above 660 if you want to start reaping the benefits.


What Can Lead to a Low Credit Score?

So why is your credit score so low in the first place? There are several reasons that this could have happened.

First, you might not have credit at all. The unfortunate thing about building credit is that it’s hard to get started without already having a line of credit. No credit sometimes looks worse than poor credit to landlords and renters.

You’re going to have to find a beginner-friendly credit card or work with a credit union to start building credit.

If you already have credit, your low credit score may be due to several factors.

Are you behind on your credit card bills? Have you recently had a hard inquiry that “dinged” your score? Are you in significant debt that you’re unable to pay off?

Even closing lines of credit or using too much of your available credit can harm your credit score. People who aren’t well-versed in financial literacy are often confused about sudden drops and how hard it is to recover from them.

So how can you fix it?


First: Check for Mistakes

It’s possible that your low credit score isn’t your fault, but that doesn’t mean that you don’t have to fix it. You should always be paying attention to your credit history, payment history, and credit score so you can avoid and fix any mistakes.

If your credit score is suddenly much lower than it should be, look for errors in your personal information first. Your name and address should be accurate.

Look for any signs that something was reported incorrectly. If there’s an indication of a late payment, even if you know that you paid on time, find proof of payment and contact relevant parties.

Worst case scenario, you may be a victim of identity theft. If there are lines of credit that you don’t recognize, contact Equifax Canada and Transunion Canada to have a fraud alert put on your account.

Report fraud to the Canadian Anti-Fraud Centre.


Consider a Credit Repair Service

If you’re looking for a quick fix and you’re not sure where to turn, you can contact a credit repair service. This costs money, and it’s not a good option for everyone. The majority of people can repair their credit on their own as long as they have the time to do so.

These companies will try to remove problematic items from your account to improve your credit score quickly. They can also analyze your credit report information and dispute mistakes for you if you’re unable to do it on your own.


Pay Your Bills on Time

This is one of the most important things to do when you’re trying to improve your credit, but it’s not as easy as it seems, especially if you’re struggling with money. You need to make sure that you’re paying your credit card bill on time every month.

Late payments and missed payments will hurt your credit score quickly. You’ll look less reliable to lenders.

You can pay the minimum balance if that’s all that you’re capable of, but if possible, keep your balance low. Making the full payment will help you avoid interest, and it may boost your credit score in the long run as long as you continue using that credit card.

This also applies to any other bills or debts that are affecting your credit. Always make at least the minimum payment. If you need help, consider taking out a short-term loan.


Avoid Opening Lines of Credit Too Often

It’s good to have multiple lines of credit (more on that later), but you should avoid opening up too many lines of credit at once. This will make you look less responsible with your money, even if that’s not true.

It’s not uncommon to apply for a car loan and a new credit card around the same time, especially if you’ve just moved to a new area or if you’ve just gotten a new higher-paying job.

You can know that you’re more than capable of paying off your credit card and your car loan with ease, but the lenders don’t know that. It may look like you’re struggling with money, and that’s a red flag.

Space out your applications, so you don’t scare off any potential lenders.


Limit Credit Checks

This is a tough one, and it’s often out of your control. You want to do everything in your power to avoid unnecessary credit checks.

Every time you apply for credit, it’s a hard inquiry. Rental applications, employment applications, and loans can also lead to hard inquiries, so it’s a good idea to ask ahead of time if you’re trying to improve your credit. Hard inquiries are visible to lenders.

Hard inquiries may make lenders think that you’re in desperate need of money.

Soft inquiries are okay. They’re only visible to you. When you request your own credit report, that counts as a soft inquiry (so make sure to do so!).


Track Your Spending (and Spend Wisely)

Too many people get caught in the trap of using their credit cards for everything because they know they’ll pay it off later. This leads to high credit card bills and a balance that makes lenders think you’re overspending (even if you’re not).

If you’re trying to work your way up to a high credit score, track every purchase to make sure that you don’t over-spend. If possible, try using your credit card only for necessities that you know you’re able to pay for, like gas and food.


Keep a Low Balance

By only using your credit card on gas, food, and reoccurring bills, you’ll maintain a low balance. Low credit utilization is crucial if you want to improve your credit score.

Credit card companies give their customers relatively high credit limits, but that doesn’t mean that you should use that entire limit. You want to keep your credit utilization around or below 30% if you want to stay in the credit bureau’s good graces.


Use Several Lines of Credit

As we mentioned before, you should avoid trying to open up several lines of credit at the same time. That said, you should still maintain several lines of credit if you’re committed to improving your credit score.

Let’s use the car loan and the credit card as an example again. It’s a good idea to have both to diversify your lines of credit. Your score will improve more quickly.

You can also have multiple credit cards as long as you’re paying them all off.

Bonus tip: Don’t get rid of old credit cards, even if you no longer use them. Closing lines of credit (yes, even paying off loans completely) isn’t good for your credit score.

You should pay off your loans, but use your credit card to buffer your score against that.


Consolidate Debt

If you’re struggling to pay off multiple loans or bills, consider consolidating them.

This means that you’re rolling them all together into one big payment. This might not seem helpful, but it can lower your interest rate (meaning that you’ll pay less overall).

A debt consolidation loan is a great option, or you can get a low-interest balance transfer card.


Repairing Bad Credit Isn’t Easy

If your credit score isn’t as high as it should be, you have options. Start working on repairing bad credit as soon as possible, and you’ll be above water before you know it.

You’re on your way to better financial health.

Are you struggling with money? Do you need a fast loan online right away? We want to help you.

Apply for a loan request from 24Cash today.

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Quick Personal Loans for Canadians :

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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