Have you been turned down for a loan and been told that it is because your credit score is too low? Maybe you are already aware that you’ve got a spotty repayment history, because of life events or something else that prevented you from being able to manage your finances for a specified period of time.
“No matter why your credit is damaged, taking steps to repair it is an important decision. Developing this plan and executing it is the beginning of getting back on your feet financially and will give you momentum to reach other financial goals in your future,” says Jeff Schwartz Executive Director, Consolidated Credit Counseling Services of Canada.
Ready to fix your credit? Here are the basic steps that you need to take to accomplish that.
Check your credit report
You may suspect that you’ve got bad credit for a variety of reasons, but the only way that you can create an effective plan is to determine exactly what you’re dealing with. Order a copy of your credit report so you can see exactly how damaged your credit is.
“This accomplishes a couple of things. First, you can determine how deep the damage is, which will help you estimate a timeline for your repair. Second, you can verify the accuracy of the entries on your credit report. Mistakes do happen, which can negatively impact your credit,” says Schwartz.
What if I find an error?
You should contact the credit reporting company directly to follow their process to resolve your dispute. If it doesn’t get resolved to your satisfaction, you do have the option of putting a notation on your credit report, which can be done through Equifax or TransUnion.
Plan to pay down debt
As a first step, develop a plan to pay down your existing debt. This will help you repair your credit because your balances won’t be as close to the limit. Maxing out your credit can be damaging to your score.. Additionally, carrying a smaller debt load will increase your cash flow, and allow you to spend within your means.
Develop a system to pay on time
One of the most important steps that you can take to repair your credit is to pay your bills on time every time. Don’t wait for the bills to arrive in your mailbox or inbox in order to pay them either. Be proactive and learn when your billing cycle runs so that you can make payments ahead of time.
Make use of automatic payments to make sure that payments are applied in a timely matter, but don’t forget to track them.
It’s time to show the lenders that you are ready to use credit responsibly. As a start, you may be required to take out a secured small balance credit card. That’s ok, because the purpose of this card is to demonstrate your credit worthiness.
Only charge what you have budgeted for every month and pay it off in full- on time, of course.
Diversify your debt
It can help repair your credit if you are able to demonstrate responsible credit use in different areas. For example, if you are able to qualify for an installment loan, that can help your repair efforts. This shows your understanding of how different credit products work and how adaptable (and successful) you are with different types of budgeting.
Bad credit holding you back? Take steps today to repair it so you can move forward towards your goals. Call us at or check out our free online debt analysis .