Once your bankruptcy or consumer proposal has been officially filed and sent to your creditors, it's time to improve your credit score. There are strategies for success. First, make your budget.
Then, regain the trust of lenders. To do this, develop good financial habits. This means, among other things, making timely and full payments of what you owe.
Another good tip is to start borrowing again, but not in any way. In any case, if you demonstrate good behavior, your score will go up.
Make a budget
You have put your money problems behind you and you are starting to consider taking out a new loan to finance a project? That's great! But before you do anything, start by:
Drawing up your budget
Identifying the causes that led you to over-indebtedness to avoid falling into the same traps
This way, you will start off on the right foot.
Make full payments
If you are the type to only pay the minimum amounts on your credit card, you need to do things differently to improve your credit score. Of course, paying the minimum amount is better than nothing. But if your goal is to raise your score, you must always pay your monthly balance in full and on time.
Pay on time
Another way to improve your credit score is to pay your bills, cards and credit lines on time. This means paying BEFORE the due date, not waiting until the day itself.
This is true even for small amounts, as any delay has an impact. Also, know that the longer and higher the amounts you pay late, the more your score will be affected.
A tip for increasing your score: start borrowing again
It is a good idea to start making loan applications again after bankruptcy or a consumer proposal. This will help you regain the trust of lenders. But don't do it just any way.
Start with loans that are easy to repay, such as:
A credit card application with a deposit as collateral. This means the bank will ask you to make a deposit to secure your credit limit. This maximum limit will be $1,000.
A loan application that you can repay within a fairly short period of time (less than 3 years).
Don't use all your credit
Use less than 50% of your credit limit. For example, if you have a $1,000 limit on your credit card, never use more than $500.
Keep your old accounts open
It's always good to have a long credit history. So if you don't have to change banks, don't do it for nothing. Keep the accounts (credit or credit line) that you have had for a long time as long as possible. This will show lenders that you are capable of stability. And if your history shows that you are a good long-term payer, this will be a positive point for your score! We also suggest that you have only one credit card and keep the oldest one!
Check your credit report
If you apply for a loan, always ask to see your credit report beforehand to check for errors. Whether you are applying for a loan or not, it is recommended to check your report once a year.
To obtain it, simply fill out the online form at www.equifax.ca or www.transunion.ca. It will be sent to you free of charge by post. If you notice a problem, you can have it corrected.
Have only one credit card
Having multiple credit cards is not a good practice in general. For many people, it leads to too much debt. Additionally, owning multiple identical types of loans (such as multiple credit cards) can harm your score.