(Re)building Your Credit Rating
If you have no credit history, or if you have a poor credit history, you might find it difficult to obtain credit. There are
things that you can do, however, to improve your odds of being able to borrow money:
- Ensure that you are current with any existing financial obligations, such as rent, mortgage, utilities, lease payments,
or debts.
- Ask your landlord or utility companies for a letter indicating your good payment history; typically these monthly bills
do not get reported to the credit bureau unless they are in arrears.
- Maintain a balance in your bank account, and be careful not to bounce cheques.
- Talk to your financial institution about your situation; if you have been a good customer for some time, they might be willing
to give you a credit card or a small loan.
- Some financial institutions offer "secured credit cards", whereby you place a sum of money on deposit with the lender, and
they issue you a credit card with a credit limit equal to or slightly less than what you have on deposit. The money you place
on deposit is frozen, and used by the card issuer to cover the balance if you default on payments.
- Consider an RRSP loan, which will also serve to reduce your income tax payable.
- If you are a student, you can apply for a credit card through one of the various student credit application kits available
on campus.
- Ask if a family member is willing to cosign for a loan; if you use the funds to invest outside an RRSP, the interest you
pay might be tax-deductible.
Keep in mind that a credit rating forms only part of the scoring process used to determine whether or not you qualify for the
credit you have applied for. You might be able to influence the score through some factors, while others are mostly beyond your
control:
- age
- gender
- marital status
- annual income
- length of time at current and previous jobs
- length of time at current and previous addresses
- property owner vs. tenant
- net worth
- other existing debt payments
- security offered for debt
- amount requested
- repayment period
If you do have a bad credit rating, beware the companies that offer to "fix" it for you, for a sum of several hundred dollars.
The Credit Reporting Act in Ontario specifies how long items must remain on your credit report (usually seven years), and a credit
bureau will not remove legitimate information before the appropriate time.
If there is a factual error on your credit report, you can have it corrected at no cost to you, by providing the necessary documentation
to the credit bureau, or having your creditor(s) do so.
The bottom line is that "credit repair clinics" can do nothing for you for several hundred dollars that you cannot do for yourself
for no cost.
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