You’ve got plenty of company. Millions of people in Canada have credit blemishes severe enough (and BEACON credit scores under 620) to make obtaining loans and credit cards with reasonable terms difficult.
Or maybe your credit is OK, but you’d like to make it better. After all, the better your credit, the less you pay in interest.
To improve your credit scores, it’s important to know where you stand now. You can get free credit reports once a year, but you typically have to pay to see your BEACON scores.
If your scores are above 760, you’re probably already getting the best rates. If they’re anywhere below that mark, though, they could stand some improvement.
We’d be happy to assess your credit bureau at “NO COST TO YOU” and help you get on the road to financial recovery.
Here are nine simple steps you can take to a speedy credit recovery.
1. Get a credit card if you don’t have one
Don’t fall for the myth that you have to carry a balance to have good scores. You don’t, and you shouldn’t. But having and using a credit card or two can really build your scores.
If you can’t qualify for a regular credit card, consider a secured credit card, where the issuing bank gives you a credit line equal to the deposit you make. Look for a card that reports to all three credit bureaus.
2. Add an installment loan to the mix
You’ll get the fastest improvement in your scores if you show you’re responsible with both major kinds of credit: revolving (credit cards) and installment (personal loans, auto and student loans).
If you don’t already have an installment loan on your credit reports, consider adding a small personal loan that you can pay back over time. This is were our Crediplan program can help you build credit and save money at the same time.
3. Pay down your credit cards
Paying off your installment loans can help your scores but typically not as dramatically as paying down — or paying off — revolving accounts such as credit cards.
Lenders like to see a big gap between the amount of credit you’re using and your available credit limits. Keep your balances between 30%-80% utilization, the lower the Utilization the higher your credit score.
4. Use your cards lightly
Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month. What’s typically reported to the credit bureaus, and thus calculated into your scores, are the balances reported on your last statements.
If you regularly use more than half your limit on a card, consider making a payment before the statement closing date to reduce the balance that’s reported to the bureaus. Just be sure to make a second payment between the closing date and the due date, so you don’t get reported as late.
5. Check your limits
Your scores might be artificially depressed if your lender is showing a lower limit than you actually have. Most credit card issuers will quickly update this information if you ask.
6. Dust off an old card
The older your credit history, the better. But if you stop using your oldest cards, the issuers may decide to close the accounts or stop updating them to the credit bureaus. The accounts may still appear, but they won’t be given as much weight in the credit-scoring formula as your active accounts.
7. Get some goodwill
If you’ve been a good customer, a lender might agree to simply erase that one late payment from your credit history. You usually have to make the request in writing, and your chances for a “goodwill adjustment” improve the better your record with the company (and the better your credit in general). But it can’t hurt to ask.
A longer-term solution for more-troubled accounts is to ask that they be “re-aged.” If the account is still open, the lender might erase previous delinquencies if you make a series of 12 or so on-time payments.
8. Dispute old negatives
Say that fight with your phone company over an unfair bill a few years ago resulted in a collections account. You can continue protesting that the charge was unjust, or you can try disputing the account with the credit bureaus as “not mine.” The older and smaller a collection account, the more likely the collection agency won’t bother to verify it when the credit bureau investigates your dispute.
9. Blitz significant errors
Your credit scores are calculated based on the information in your credit reports, so certain errors there can really cost you. But not everything that’s reported in your files matters to your scores.
Here’s the stuff that’s usually worth the effort of correcting with the bureaus:
- Late payments, charge-offs, collections or other negative items that aren’t yours.
- Credit limits reported as lower than they actually are.
- Accounts listed as “settled,” “paid derogatory,” “paid charge-off” or anything other than “current” or “paid as agreed” if you paid on time and in full.
- Accounts that are still listed as unpaid that were included in a bankruptcy.
- Negative items older than seven years that should have automatically fallen off your reports.