Rebuilding Your Credit

Your credit rating is a factor that can impact not only your ability to obtain credit but also the cost of credit, and, in some cases, obtaining employment and renting an apartment or home. You can rebuild your credit rating, but it is a process that you have to work at and will take time.

In order to determine what steps you need to take, it is important to obtain a copy of your credit report to determine what others may see when reviewing your credit history. The contact information for the two major credit reporting agencies in Canada is provided below.

Equifax: 1-800-465-7166 or online at:

http://www.consumer.equifax.ca/cs7/Satellite/?pagename=EFX/Wrapper&simpleurl=credit-product-list-ca/contact_us&locale=en_ca

TransUnion: 1-800-663-9980 or online at:

https://www.transunion.ca/customer-support/contact-us

You can obtain a free copy of your credit report from either agency by calling them direct or sending an application in writing with the applicable supporting documents. It is not necessary to pay for your report or register for monitoring. However, if you want a copy of your report quickly, you can obtain it on-line with payment by credit card.

Steps to rebuilding your credit

  1. Review Your Credit Report. You need to review the information in your credit report to ensure that it is accurate and has no information that is not related to you or your debt. Your credit score is a mathematical formula which uses various factors such as your payment history, outstanding debt, length of the accounts held, the type of credit held, and whether you have collection or other actions against you. If you do not understand your credit report, there is free on-line information available from Financial Consumer Agency of Canada at https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/understand-credit-report.html.
  2. Fix Errors in your Credit Report. If you locate any errors or items listed that you do not recognize, you should contact the creditor listed to investigate the item. If you are certain it is an error, you may also contact the credit reporting agency to report the item. The agency will require some evidence to support your claim. If you have completed a debt management program, proposal or bankruptcy, you must ensure that the date completed is reported on your credit bureau and that all amounts owing for the creditors included are listed at zero.
  3. Pay on time. Paying your debt on time is critical to a higher score, even if you can only pay the minimum balance required. Many individuals overwhelmed with debt still have reasonable credit scores, even if using other credit to make payments, just because they are paying on time.
  4. Reduce your outstanding balances and do not exceed your credit limit. Larger balances owing and late payments negatively impact your credit rating. If your debt is overwhelming, filing a debt management program, consumer proposal, or bankruptcy may actually result in a higher credit rating sooner than if you take no action.
  5. Avoid excess credit. You may be offered additional credit at any time. It may be tempting to add to your credit, particularly if you are under financial pressure to make your existing payments. However, additional new credit does not necessarily improve your credit score and, if you are tempted to use the credit and unable to meet the payments, may make your financial situation more dire.
  6. Your credit score and credit report is one factor used when assessing your financial position. Your personal assets and savings are another. If you have savings, you demonstrate that you are financially stronger and have a contingency fund to meet your payments to creditors when your income is impacted by illness, job loss or other factors. Your bank will be able to assist you with options for setting up a savings plan.
  7. Good vs bad debt. Your credit score is impacted by many variables including types of debt. Older debt, or personal loans, may improve your credit rating by demonstrating your credit history and ability to handle larger balances. Personal loans for the purchase of assets such as RRSP’s or other investments or vehicles are also safer than credit cards because you have an asset that you can use to repay the loan if you fall into financial difficulty.

Where  Can I Find More Information?

D. Kwasnicky & Associates Inc. is a licensed insolvency trustee. If you are struggling with debt repayment or concerned about your credit score, take the first step and contact us for a free, confidential assessment of your financial options.

One of the concerns expressed by most individuals when they meet with a Licensed Insolvency Trustee is what impact filing a bankruptcy or proposal has on their credit rating. Although your credit rating is impacted by any settlement of debt, where your financial problems are critical, filing a proposal or bankruptcy can assist you in obtaining your financial freedom and taking the first step to improving your credit rating.