A negative credit report will prevent you from obtaining a loan no matter what the circumstances - which means that if you want a loan, or a mortgage, you should start thinking about credit repair and things you can do in terms of rebuilding your credit.
What you should know is that bad marks will only remain on your credit report for up to seven years, except in certain circumstances. Following that seven year period, the information disappears from your record.
Now, if waiting out the seven year period does not appeal to you, there are several things you can do to get a head start on repairing your credit history. Rebuilding credit can be and often is a difficult task, but it is possible.
Steps To Take when Rebuilding Credit
There are two points to improving your credit history: first - dealing with your debts, and second - repairing your credit.
To start, first obtain a copy of your credit report. You will not be able to repair credit without knowing where the problem areas are. If you believe there are any mistakes on the report, contact the credit bureau right away.
Next, pay off all of your bills. If you know that you only have a minimal debt on an old credit card, simply save up that amount of money, contact the credit card company, and make the payment. Paying debts is the quickest way to get back on track. If you find that you are unable to pay off your debts, you may want to consider a debt management plan, a proposal to your creditors or possibly even bankruptcy.
Once debts have been dealt with, it is time to start rebuilding your credit history.
First, borrow some fully secured money. Secured loans are the debts you acquire that are backed by an asset or guarantee (a car loan for instance). If you do not pay, your "security" is simply sold by the person you owe. Another option is having someone else co-sign or guarantee your debt. In this case, if you do not pay, your co-signor is the one responsible for the debt, but - if you do pay, your credit record will improve.
Second, get a secured credit card. You can do this by putting a sum of money on a deposit with a bank, and pledging that money as security for the card. If you do not make your payments, the bank simply takes money from your deposit and reduces your available credit.
Next, borrow money for an RRSP. Banks view those with RRSPs differently since RRSPs show that you are planning for the future. Use tax refunds to repay the loan. That way, you will be paying off the loan faster than necessary, which will improve your credit report substantially.
Finally, borrow money even if you do not have the need. Obtaining a small line of credit and using it to pay off bills is strongly recommended. By immediately paying off your line of credit each month, you will be working towards rebuilding your credit.
The single most important advice when it comes to credit repair is "Get your bills paid on time". Timely bill payments prove to potential lenders that you are a responsible money manager and help you work your way toward rebuilding your credit. |
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