A series of bad choices left your credit in tatters. It will take time and a lot of hard work, but you can repair your bad credit and take control of your financial health. LoanConnect not only offers bad credit loans in Canada, but we also offer tips for boosting your credit score. Check out these insights.
Know Where You Stand
Get a concrete idea of how bad your credit currently is by requesting a copy of your credit report from TransUnion and Equifax. Once you have your report, look it over for accuracy. Dispute any errors you find, no matter how minor. Even a small mistake may drag your score down a few points. Also, now is a good time to sign up for credit tracking apps and services. That way, you can easily sign in and check your current credit standing for free as often as you want.
(Re)Create a Budget
If you don’t have a budget, create one that you can stick to and accounts for all your financial obligations, even the ones that happen once a year, such as annual credit card fees. Even if you already have a budget, it may not fit your current financial needs and goals. Either way, design a new budget that supports your mission to repair your credit. Check your bank and credit card accounts to calculate your regular expenses, using the information to create a realistic budget. In the weeks and months ahead, you may feel that your new budget doesn’t work as well as it should, and that’s OK. Don’t hesitate to adjust your budget until it fits just right.
Prioritize Paying Bills on Time
From now on, make it a priority to pay your bills on time. That way, you don’t have to worry about late fees that drain your financial reserves. If you’re behind on specific accounts, take steps to get caught up ASAP so that you’re in good standing. Catching up on late payments also helps repair your bad credit score. Lenders and creditors report late payments to Equifax and other credit reporting agencies, which damages your creditworthiness. A single late payment may remain on your report for several years, so focus on catching up.
Apply for a Loan
Lenders offer loans for bad credit, which can help your credit score and report if you make on-time payments on the loan. Consider a small loan that you can use to pay off two small debts. That way, you have fewer due dates to keep track of. Depending on the interest rate on loans for poor credit, you can reduce the amount of interest you pay by knocking out a high-interest account. Before accepting a bad-credit loan offer, read over the agreement to ensure that you can meet the requirements.
Do some digging to find out if the lender conducts a hard or soft inquiry on your credit before making a loan offer. Inquiries harm your credit, but you may feel that it’s worth it in your quest to repair your bad credit. At the least, do not allow lenders to make too many inquiries, as several of them may serve a serious blow to your already tender credit.
Boost Your Credit Limits
Make the most of your current credit cards by asking for a higher limit. If you have been with your current credit card issuer for a few years, they may agree to boost your limit. That said, you could receive a rejection if you have a history of late payments or otherwise show yourself to be a risky credit cardholder. Depending on the number of open credit card accounts you have currently, you may want to wait until you catch up on payments before asking for a higher credit limit. If you increase your credit limit, pretend you have access to the same amount of credit as before. You do not want to offset the benefits of boosting your limit by racking up more debt.
How boosting your credit limit helps your credit score is that your credit utilization ratio makes up almost one-third of your credit score. This ratio is the amount that you owe on all your accounts compared to how much available credit you have. For instance, if you have $5,000 in credit card debt and you have access to $20,000 of combined credit, then your credit utilization ratio is 25%. While financial experts recommend keeping your utilization ratio under 30%, aim for keeping it lower to boost your credit score further.
Set Up Automatic Payments
Do you owe a lot of your credit woes to making late payments? If so, consider signing up for automatic payments so that you do not worry about missing another payment. If you’re concerned about overdrafts on your bank account by agreeing to automatic payments, set up regular reminders on your phone’s calendar a few days before your regular due date.