Bad credit – No credit – No problem!

If you have no credit, poor credit or bad credit you do have a problem. Here are a few tips to help you “rebuild” your credit rating. Remember no one can “repair” your credit – do not fall victim to these unscrupulous scams.

  • It is estimated that over 47% of all credit reports contain some errors. You can save a lot of time and frustration by learning the secrets to a maintaining a good credit rating.
  • Limit the number of inquiries on your credit report. Every time your credit file is “pulled” your credit score is reduced. Do not apply for credit that you do not really want or need.
  • Use a mortgage broker when applying for a loan or mortgage to reduce the number of inquiries on your file.
  • Do not allow car dealerships to pull your file until you know that you want to buy that car.
  • Maintain your employment and residence for at least TWO years.
  • Do not keep your credit card balances near, at or over the credit limit – this will lower your credit score.
  • Pay the minimum payments on time and in full as required by the signed agreement you have with your creditors. Credit reports show how many times you have paid your accounts late as well as paying on time.

Building a credit history

Building a good credit history is important. However, sometimes it can be difficult to get started or restarted as the case may be. One of the newest methods of building or rebuilding a credit history is with a secured credit card. There are several on the market now in Canada.

With almost 80,000 consumer bankruptcies a year most Canadian financial institutions are falling behind when it comes to providing help to establish or re-establish a credit rating. There are a few that will provide a secured credit card but they usually want at least twice the card limit to placed as a security deposit with them first. This means that you would have to provide a security deposit of $1,000 if you want a limit of $500 on a credit card.

Benefits of a secured card

  • Accepted at over 595,000 Canadian merchant locations and over 23 million world wide.
  • Cash advances – (not recommended).
  • Reports to the credit bureau and creates a new credit rating for you, right away. Use the card each month and make your payments on time.
  • Your security deposit earns interest and is equal to the credit limit provided on the card. So if you get into trouble you can cash in the deposit and pay off the balance on the credit card.
  • Renting a car.
  • Booking a room.
  • Purchases over the net.
  • A secured card can do anything that a regular credit card can do.

However, secured cards are not free – there is a monthly fee of $6 and the interest rate if you carry a balance is 19.50%. You receive about 2% interest on your security deposit. The security deposits range from $75 to $5,000 – the money is kept on deposit for the term of the card or until you apply and are approved for an unsecured card. Almost anyone can qualify (except Quebec residents). 

Previous bankruptcy – no problem. Just be sure that you are discharged before you apply.

Judgements or unpaid collections – no problem but you must use third party funds to make your security deposit.

Credit cards are a way of life in this country and if you have ever been without one even just to use for identification purposes you know how difficult life can be.

Credit is a privilege not a right – work hard to maintain a good credit rating but remember your credit rating is not a measure of your personal worth, it is a credit industry tool.