How to rebuild your credit?
No one is immune to financial bad luck or mistakes in the course. How to rebuild your credit when it is damaged? Here are eight tips to make it happen.
1. Pay on time
To rebuild your credit, it's important to always make your payments on time, regardless of the amount. "A late payment has the same negative effect on the credit rating whether the debt is $ 30 or $ 10,000," explains Sylvie Bouchard, director of credit and valuation expert at National Bank.
So in the case of cards and lines of credit, you need to make at least the minimum payment. Are you more of the moody type? To rebuild your credit and avoid forgetting, place reminders in your calendar. Better yet, schedule direct transfers. "If you forget, at least the minimum payment is made," notes Ms. Bouchard. “You could also provide overdraft protection, such as a line of credit in your account. This will prevent a bad grade on your file if a payment goes through and funds are unavailable. "Remember that you can schedule pre-authorized transfers for your entire account balance payable.
2. Check your credit report
Check your credit report once a year to keep track of its progress and check for any errors or inconsistencies. If so, have them corrected. "Equifax also offers services to be alerted in the event of irregular activities," said Ms. Bouchard. It can help detect identity theft, for example.
Take the opportunity to ask for your credit rating. "When it is 680 and below, it indicates deterioration," says the expert. This is a sign to consider rebuilding your credit. For comparison, a credit score of 760 is considered excellent.
3. Avoid filling out your card
Avoid having a high balance on your credit card over your limit. “When it's too high, it starts to affect the credit rating,” says Bouchard. “Better to have $ 900 in debt on a card that has a limit of $ 2,000 rather than $ 1,000. »If you have a high credit card balance, you may be over your limit with interest and could hurt your credit rating.
4. Ask for help
Do not hesitate to speak to your advisor if you are having financial problems. He can work out strategies with you to regularize the situation. When applying for a loan, for example, the advisor has access to your credit report. He can help you determine how to rebuild your credit based on your habits. Sometimes just one thing can seriously hurt your credit rating.
5. Clean up your credit
Do you have multiple credit cards, but only use one or two? Cleaning up your wallet helps rebuild your credit. “A lot of times, people take a store card for a promotion,” says Bouchard. “But they forget that sometimes there are fees. As they do not use it, they neglect to consult the statements of account. They therefore end up with major delays that are detrimental to their credit rating. "Remember to call the issuing company to cancel a credit card. Cutting it into pieces is not enough.
6. Avoid many requests
Some customers will shop with multiple companies for a car. It’s a good way to save money. However, it is best to wait until you have made your choice before authorizing the credit check. Making too many requests is bad.
“Sometimes people take out a mortgage, ask for a margin to do the work and buy furniture on installments,” explains Ms. Bouchard. “It can be justified. But the accumulation of loans over a short period of time can still negatively affect the credit rating. "It is better to avoid doing everything at the same time and to plan your purchases well.
7. Watch out for endorsements
A loved one is trying to rebuild their credit and asks you to endorse their loan application? This boost could hurt your efforts to maintain a good credit rating. By endorsing it, you become responsible for this debt and for non-compliance with payment commitments. "Generally, the financial institution will contact the borrower first to resolve the situation," explains Ms. Bouchard. “When that doesn't work, she contacts the endorser. At that point, there might already be a few months of delay. The endorser's credit will then be damaged. "
8. Start early
For younger people, the question is not how to rebuild their credit, but how to build it.
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