Get back on track and rebuild your credit worthiness
WINDSOR, Ont. — There are no quick fixes when it comes to a damaged credit score.
Once you’ve fallen behind on payments, piled on more debt than you can handle or gone bankrupt, it takes time to rehabilitate your standing in the eyes of lenders and others interested in your creditworthiness.
So it is good news that Canadians are improving when it comes to making timely payments on their loans and credit cards.
Since peaking in 2010, the number who have missed three or more consecutive payments on a nonmortgage debt has fallen to 3.04 per cent of those eligible for credit, according to credit reporting agency Equifax Canada. That amounts to 738,526 Canadians.
Typically, 40 to 50 per cent of those will default on those payments, said Nadim Ado, Equifax’s vice-president for consulting and analytical services.
But if they can get back on track, they can rebuild their creditworthiness in as little as six months to a year, he said. That’s relatively quick compared with the seven years it takes those who have gone bankrupt.
Avoiding that route means taking action early on to track expenses and find ways to cut spending. Equifax suggests calling lenders to explain the situation and see if they help work out a repayment plan. It also recommends contacting a reputable credit-counselling agency to draw up a plan to get caught up.
“You are the only one who can fix your credit,” said Wendy Dupuis of Windsor’s Financial Fitness Centre, a non-profit agency that provides money-counselling.
“Making sure that you’re making whatever payments you have on credit on time is absolutely key. Try to live on cash and make sure that bad stuff falls off your record over time.”
A safer option for starting to rebuild a good credit history, she said, is to apply for a secured credit card, secured by a deposit, usually one equal to the card’s limit. Paying off the balance monthly can eventually lead to qualifying for a regular credit card.
Avoid carrying a card balance of more than 30 per cent of your limit — that can lead to a downgrade, even for someone with a good credit history, Dupuis said.
A poor credit report doesn’t just make it harder and more expensive to get loans. It can make renting more difficult because landlords are allowed to review credit reports of potential tenants. Home and property insurers also typically charge more for coverage when the owner has a bad credit history, Dupuis said.
The two main credit reporting agencies Union. Consumers should focus on their credit reports and not the scores the agencies use, Dupuis said.
Equifax and Transunion charge for instant electronic reports and other credit-monitoring services, but both will provide consumers with a free written copy of their credit report (Transunion calls it a “consumer disclosure”).
The information and forms are available on their websites or by phone. Call Equifax at 1-800-4657166 or Transunion at 1-800-6639980.