‘You can’t actually repair’ credit, but you can rebuild
Have you checked your credit score recently? You score can affect your chances of qualifying for a loan, a credit card or even leasing an apartment, and even a one-off late or missed payment can impact your ability to secure the best possible rates on certain loans.
If you need to repair your credit, it might be tempting to seek help from a credit repair company that claims to offer a quick fix. However, some experts caution against this, as there are no shortcuts — or a fast-tracked process — to improving your credit.
Shiraz Ahmed, a senior portfolio manager at Raymond James in Toronto, warns against companies that claim to conceal negative items, like bankruptcy or revolving credit that’s been delinquent for more than three months, from your credit bureau. A telltale sign of a scam is if a credit repair company asks for a fee upfront for its services. Alim Dhanji, senior financial planner at Assante Financial Management in Vancouver, adds that you should also steer clear of any company that guarantees immediate improvements to your score.
“You can’t actually repair your credit,” Ahmed said. “You have to rebuild your credit, and that’s usually done (with) time and by making good financial decisions between now and then.” It can take months or even several years to raise your credit score.
If you’re in financial peril and need help servicing your debt, Ahmed recommends speaking with a licensed insolvency trustee, a federally regulated professional who can help negotiate your debts with your creditors, along with offering practical advice on budgeting and debt consolidation. Similarly, Dhanji suggests seeking help from credit counselling agencies, which are typically non-profit financial educational organizations that offer services like debt consolidation.
So, what are some steps you can take now to begin rebuilding your credit? To start, pay your bills off on time, keep your balance on credit cards low, and keep your utilization rate low. Expressed as a percentage, your utilization ratio is how much of your revolving credit — across credit cards and loans — you use. The longer you use your credit products, the better your history and score. Experts also recommend not borrowing more than you can pay back.
While there’s no exact science to how credit bureaus calculate your credit scores, experts typically recommend keeping your utilization ratio below 30 per cent.
And if you do decide to work with a credit repair company, Dhanji recommends reading reviews on the Better Business Bureau first, warning that you should avoid companies that seem too good to be true.
“Nothing happens fast in the credit world,” says Ahmed. “I find that there’s an allure of the public into some of these companies and some of them make some misleading claims.”