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3 Steps to Repairing Your Credit

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The deed is done. You’ve missed a few payments, you’ve overdrawn an account or two, you’ve maxed out your credit and are hiding like an ostrich with its head in the sand.

Obviously you do not want to be in this position, but do not fear. There are steps to take to repair your credit, get you in a position for a financially free future and to even buy a house within the next year. That is, if you begin today.

Does this sound good to you? Then keep reading.
The best way to rebuild your credit is to have good credit experiences behind you.

Step One: Calm The Fire

If you are not doing this already, begin making minimum payments on all lines of credit you own.

Step Two: Put It Out

Bring all the balances on each card/loan down to at least 50% of your available credit. If your credit card’s limit is 2,500$, bring your balance down to $1,250.

This goes for all trade lines like personal lines of credit, car loans, etc… You want to have some credit ‘available’ to show credit companies it is possible for you to have credit under your name without using it. It is better to have two 5,000$ credit lines with balances of 2,500$ each than to have one balance of 4,000$ and another of 1,000$.

This is a hard step because it means paying back some of your debt. For tips on how to manage debt, check out our Facebook page. We frequently post tips on how to get your finances in order.

Step Three: Start Rebuilding


The goal is to have two trade lines at a minimum of 5,000$ each. Trade lines are any type of credit line that will go on your credit report. Car loans, credit cards, personal lines of credit and mortgages all count as trade lines.

If you have bad credit it’s hard to apply for credit, right?

While that may be true for the majority of credit card companies and Big Banks, there are exceptions:

  • Capital 1
  • People's Trust
  • Home Trust
  • Lendit 

You can apply to most of these companies online.

There are other ways: Say you have 1,000$ on your hands that you will spend on rebuilding your credit:

  • Go into a credit card company with money in your pocket. This only works with Tier 3 lenders, like the ones mentioned above. Big Banks will probably refuse this (unless you are new to Canada or have no prior credit history). Apply for a credit card while putting money down and you are more likely to be accepted. The bank will keep your maximum balance at the amount of money you put down (similar to a debit card).
  • Take out a loan to buy an investment (for example, a GIC). Banks will have no problem doing this, as this is a no-risk situation for them, as long as the investment stays in their institution. This is not the ideal path for repairing credit, but should be seen as a last resort. If are you stuck, this might be an option to consider. Basically, you have a forced savings while still earning interest. You pay the bank some money for the loan, yes, but are also rebuild your credit at the same time.
  • Step Four: Maintain

    With your trade lines and loan-to-balance ratio in order, the next step is to let your
    credit history develop in a positive way. This might be the hardest step, if you’ve suffered from bad credit in the past. It might be tempting to go back to earlier spending habits once you see available credit on your cards.

    It is possible, but bouncing back from a credit history horror story does take a process and therefore time. Allow this time to pass and gain control of your financial habits.


    For maintaining good credit, read our blog post here:


    Question: How long can I expect to have bad credit for?

    The worse your credit trouble has been, the longer for it to bounce back. 12 months is standard for a credit ‘refresh’.

     Remember that poor credit performance in the past will not follow you forever.

     Credit Accounts 

    Do not close credit accounts! A closed credit account will still show up when your report is pulled up. You will have to explain to the bank why it was closed.

    Credit Reports

    Check your credit report. This might be a scary process that you don’t want to do. We understand this

    Who wants to see their credit report if you know it is bad news?

    Yes, it is easier to avoid, but it won’t help you fix the problem.

    Looking at your credit report is a good step towards improving it, so next time you look at it, you don’t have to be afraid.

     Applying for Credit

    Only apply for credit that you need.

    When you are applying for credit, banks will pull up your report. This will cause your score to go down if you apply too many times in a short period of time.


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