Rebuilding your credit score is essential to securing your financial future. It can help you get access to low interest financing and make sure that you qualify for the loan or credit card you’re interested in. You’ll typically need to start rebuilding your credit if you fall below a score of 650 (which is considered a “good” score that should let you qualify for most types of credit).
How to rebuild credit fast in Canada
There are a number of simple ways to rebuild your credit score or keep your credit from deteriorating if it’s in decent shape. These include the following:
Use credit often. It might seem counterintuitive, but the more you use your card the faster you can build up your score (as long as you keep up with your payments).
Make payments on time. On-time payments account for around 35% of your credit score, so you should be sure to make at least your minimum payment when it’s due.
Pay your balance off each month. Pay your credit card balance off in full every month to improve your score and save money on interest.
Mix up your credit types. Take out a variety of credit types (such as credit cards, mortgages and loans) to diversify your debt portfolio.
Try not to apply for too much credit. Avoid applying for too much credit since doing so will result in hard inquiries on your file (which can lower your credit score).
Keep a low balance on multiple cards. Try not to max out your balance on a single credit card – instead, you should try to keep a low balance across several cards.
Avoid new debt. Avoid taking out new loans or credit cards wherever possible since these debts are seen as “immature” and can bring down your credit score.
Correct errors in your credit report. Contact the credit bureau if you notice an error on your report and ask it to fix it.
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In addition to the tips above, below are specific methods to rebuild your credit.
1. Consider a debt consolidation loan
A debt consolidation loan can help you pay off all of your debts at once, so you’re left with just a single loan and one easy payment. This makes your debt load easier to manage and can help you save money on interest and late payment fees. You can also use a debt consolidation loan to pay off your credit cards if you want to diversify your debt portfolio to improve your overall credit score.
2. Transfer credit card balances to low interest cards
Credit card debt can be consolidated by transferring all of your outstanding credit card balances to low interest cards. Just be aware that it’s not recommended that you switch all of your debt over to a single card. Instead, you might want to switch your cards over one by one to multiple low interest cards (since having a high single-card credit utilization rate can bring your credit score down).
3. Use a secured credit card
Unlike low interest credit cards, secured credit cards allow you to put a deposit down to cover your outstanding balance. This becomes your credit limit and is used to secure payment for any money you spend on your card. If you default on your payments, the bank uses this deposit to pay off your outstanding balance.
If you have a secured card designed to build your credit, your provider will report all of your on-time payments to the credit bureau. This can help you build up your credit until it’s high enough for you to access a regular credit card. Along with an improved credit score, you’ll also get your deposit back when you’ve paid off your balance and close your account.
Compare secured credit cards
4. Use a credit builder loan
Credit builder loans are specialized loans that are designed to rebuild your credit. With these types of loans, your lender will report your on-time payments to the credit bureaus. This will ensure that every payment gets logged and your credit score goes up faster than it would if you just had a regular loan.
The downside of credit builder loans is that they sometimes come with higher interest rates (likely because most people applying for them have bad credit). As a rule of thumb, you should try to avoid providers that charge administration or legal fees to set up your credit builder loan.
It can take several years to get your credit score back to normal if you’ve missed a significant number of payments or defaulted on several debts. And you could be looking at seven years or more to repair your credit if you’ve taken out a consumer proposal or filed for bankruptcy. You’ll have less trouble getting back on track if you only have one or two missed payments or a single bill that’s gone to collections.
To keep your credit score in check and get ahead of the curve, you might like to use a credit monitoring service such as Marble Financial Score Up. Marble allows you to track your progress in real time and even offers helpful advice to help you repair your credit faster. You might also like to consider a credit repair service like Koho, which operates an innovative repayment scheme to help you improve your credit.
How can I find out my current credit score?
To find where your credit score sits right now, you can apply to get your credit report from a credit bureau. Canada’s two main credit bureaus are Equifax and TransUnion. You can also sign up for a credit score tracking service such as Credit Verify or Mogo.
Sign up for credit score tracking
Rebuilding your credit score can take a lot of time and effort, but it’s a necessary pursuit if you want to borrow money or get low interest rates in the future. Find out more about how you can rebuild credit fast in Canada, and learn which services and products could help you get back on track with your finances.
Frequently asked questions
Your credit utilization ratio is the amount of debt you’ve borrowed divided by the amount you have access to. This is an equation that gets used to assess your creditworthiness. Ideally, your credit utilization ratio should be lower than 30% if you want to improve your credit score.
This depends on your existing credit rating and your ability to take remedial measures. It can take anywhere from months to years to rebuild credit in Canada, and really depends on your personal financial situation and your dedication.
Yes. There are some reputable websites that offer free copies of your credit report. Additionally, you can receive free paper copies of your credit report from one of the two credit bureaus, Equifax or TransUnion, however it may take weeks for it to arrive. If you check your credit score online with one of the bureaus, you will usually have to pay a small fee to see the score immediately.
Most credit agencies agree that a score of around 650 is considered good enough to be able to qualify for most forms of credit.
The most important way to rebuild credit fast in Canada is to make all of your payments on time. Even one missed payment can damage your credit score.
Emma Balmforth is a producer at Finder. She is passionate about helping people make financial decisions that will benefit them now and in the future. She has written for a variety of publications including World Nomads, Trek Effect and Uncharted. Emma has a degree in Business and Psychology from the University of Waterloo. She enjoys backpacking, reading and taking long hikes and road trips with her adventurous dog.
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