Everything You Need to Know About Fixing Bad Credit

fixing bad credit

Is bad credit holding you back from the things you want? If you’re one of the 56% of Canadians who have never checked your credit score, then now is the time!

Bad credit can be a significant problem. It can make it difficult to get vehicle and housing loans. It can even hold you back from finding a place to rent.

It can feel like the end of the world when your credit score is low, but there is always light at the end of the tunnel. Fixing bad credit is possible with the right steps and a little time.

Check out our guide below to learn more about fixing bad credit.

What Is a Good Credit Score?

A good credit score is essential because it shows that you’re a responsible borrower. It can also help you get approved for loans and other types of credit.

If you want to buy a car or a house, your credit score will be one of the factors that lenders look at when considering your application.

If you need rental housing, your credit score may be a factor that landlords consider. The higher your credit score, the better your chances of getting approved for loans and credit.

What Is a Bad Credit Score?

A poor credit score can make it hard to get approved for loans and credit. A bad credit score is anything below 600.

You’re considered a high-risk borrower if you have a poor credit score. This can make it tough to get approved for loans and other types of credit.

Pay Your Bills On Time

One of the best things you can do is make sure you make all your payments on time. This includes your credit card payments, utility bills, and any other type of bill you have.

If you’re having trouble making your payments on time, you can set up automatic payments. This way, you’ll never have to worry about late payments again.

Check Your Credit Report for Errors

Checking your credit report is one of the best ways to get a snapshot of your credit health. It can also help you identify any errors dragging down your score.

If you find an error on your credit report, you can dispute it with the credit bureau. The credit bureau will investigate the error and remove it from your report if it finds that it’s inaccurate.

You can also use this information to see if you have any outstanding bills in collections, which can also drag down your score.

Pay Down Your Debt

One of the best things to improve your credit score is to pay down your debt. This includes your credit card debt, student loans, and any other type of debt you may have.

Paying down your debt can be a challenge, but it’s worth it in the long run. You can start by making a budget and then working on a plan to pay down your debt.

Keep Your Credit Use Low

Your credit use is the amount of credit you’re using compared to your available amount. For example, if you have a credit card with a $1000 limit and use $500 of that credit, your credit use is 50%.

Keep your credit use below 30% of its limit. This shows lenders that you’re responsible and not maxing out your cards.

If your credit use is high, you can try to pay down your balances. You can also ask for a higher credit limit from your lender. This will help lower your credit use and improve your credit score.

Credit bureaus like to see your credit use below 30%, but if you pay it off completely, it can bring your score down! So keep that in mind!

Get a Secured Credit Card

secured credit card is a good option if you have bad credit. You put down a deposit that becomes your credit limit.

For example, if you put down a $200 deposit, your credit limit will be $200.

The benefit of a secured credit card is that it can help you build your credit. As you use the card and make your payments on time, you’ll start to see your credit score improve.

Don’t use more than 30% of your credit limit. This will help keep your credit use low and improve your chances of fixing bad credit.

Don’t Apply for Too Many Loans at Once

Each time you apply for a loan, the lender will make a hard inquiry on your credit report. A hard inquiry can lower your credit score by a few points.

So, if you’re applying for many loans in a short period, it can have a large impact on your credit score. If you’re trying to fix bad credit, only apply for a few loans that you know you’ll get approval for.

Become an Authorized User

If you have a family member or friend with good credit, you can become an authorized user on their account. It will show up on your credit report as if you have the same good credit history.

Only do this with someone you trust. You don’t want to damage your relationship by becoming an authorized user on their account and then not paying your bills.

How Long Does It Take To Fix Bad Credit?

If you have negative items on your credit report, it may take a few months to a year to see your score improve. But if you have more significant damage to your credit, it may take a few years to see a big improvement.

Be patient and consistent with your credit repair efforts. The longer you focus on fixing your bad credit, the more likely you’ll see results.

Fixing Bad Credit Doesn’t Have to Be Hard

Building a better credit report takes time and diligence, but it’s well worth it. You can fix your bad credit and improve your financial future with effort.

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