How to Deal With Bad Credit in Canada
Bad credit can happen to anyone. All it takes is a series of financial setbacks to trigger a nosedive in your score. The issue may have to do with injuries that prevent you from working, an unexpected financial downturn due to a job loss, or any number of other events. The thing to remember is that your credit does not have to remain poor forever. Using methods ranging from a new approach to budgeting to securing a bad credit personal loan and making the payments on time every time will help increase your score. Here are some tips on how to deal with bad credit and eventually be on better financial footing.
Start By Evaluating Where Your Credit Score Stands Right This Minute
You are about to go on a journey, and that means planning the route. When the journey has to do with restoring your credit rating, the best place to begin is by obtaining copies of your credit reports and going over each one thoroughly.
Keep in mind that there will be some difference in the details you see on each one. That’s because most creditors only report directly to one or two primary reporting agencies. There may be details that are outdated or possibly even entries that don’t happen to apply to you.
Making sure all of the details are up to date could end up helping improve your score. It can take some tenacity on your part to deal with the reporting agency and the creditor to get things squared away, but it’s worth it. Correct information could increase your score and be the first step toward recovering a favourable rating with Equifax and TransUnion agencies.
Focus on Bringing All Your Open Accounts Up to Date
If you have any credit cards or loans open, make sure they are all up to date. If one or two of them are a little behind, make minimum payments on the up to date accounts and divert funds to make the ones in arrears current. If you should need to apply for some new type of credit, rest assured that a creditor who sees that all of your accounts are up to date will be more likely to approve your application.
Develop a Strategy for Paying Off Existing Debt
Creditors also tend to look at the amount that you current owe versus the income generated each month. The same is true with the credit bureaus. It’s possible to improve your rating by lowering the amount of debt you’re carrying. That means restructuring your budget and developing a plan to pay off as much debt as possible.
You can use the same basic approach that helped you bring accounts in arrears up to date. Start by identifying the accounts with the lowest open balances. Make minimum payments on the rest while you pay off those lower balances. The result is more references on your credit reports of accounts that are paid in full and in good standing. Once you finish with those, move to the next lowest account on the list. You’ll notice your score increasing a little here and there as the months pass.
Seek to Live Below Your Means
People tell you to live within your means. You’re going to go one step further and live below your means. That means deciding that you will live on a percentage of your net income. Something like 80% is doable, although you may need to begin with something along the lines of 90%.
Set aside the difference in some type of interest-bearing account, like a savings account. Having money in the bank also helps with your credit scores. This approach also helps you develop the habit of doing more with less while creating a financial cushion for emergencies.
Consider a Small Loan to Help Rebuild Your Credit
As part of the planning, consider the idea of looking into Magical Credit – personal loans for people with bad credit in Canada. The goal is to take out a small loan and repay it according to the terms. You may use the funds to pay off some existing debts, allowing you to improve your score. Make sure the lender reports to the major credit bureaus, since the positive comments will also help your score.
You do have options even when your credit rating is damaged. Use them to restructure your finances or to take care of a pressing need. When used wisely, it’s possible to obtain the funds that you need while also doing something good for your credit.