Tips for rebuilding your credit

A financial misadventure can be an opportunity to rethink how you’re managing your personal finances and get off to a fresh start. Follow our financial recovery advice to rebuild your credit and get a second start.

Repair your credit rating faster

It is a common belief that you have to wait seven years before you can borrow money again after a bankruptcy or consumer proposal. Did you know that you can shorten that time by making the right moves? There are ways to rebuild your reputation and repair your credit faster. It’s important to be proactive—life goes on and you can give yourself back the means to make your plans a reality.

First steps

Make a budget and stick to it.
Determine the causes of your debt.
Apply for a credit card with a security deposit ($1 000 limit max.).

Apply for a loan to build up your savings

In order to regain lenders’ trust, apply for a loan from a financial institution that you can pay back in under three years. Then give the lending institution the option of investing the money in a Guaranteed Investment Certificate (GIC).
As you pay back your loan, your GIC will become available and you can use it for new projects such as buying a car or house, taking a trip, or investing in an RRSP. What’s more, you’ll show you can manage your credit, which will help increase your credit rating.

Prove your stability

Live at the same address as long as possible.
Maintain a stable job.

Live within your means and pay your bills on time.

Maintain a maximum debt ratio of 30%.
Pay your bills before the due date.
Make sure the unpaid balance on your credit card never exceeds 50% of your available limit.
Don’t raise the limit on your credit card even if your financial institution offers.
Pay your credit card balance in full each month.

Consult your credit report immediately

It’s very important to request your credit report from Equifax or TransUnion to verify the content. If the information is no longer correct or you find other errors, it can lower your score. By cleaning up your report and requesting that Equifax or TransUnion make the necessary changes, you can improve your score. Head to equifax.ca or transunion.ca to consult your credit report.

Use your credit strategically

Have only one credit card. Cancel your newest credit cards and only keep the oldest one. Your oldest accounts will help your score because they give you a longer credit history.
Group your loan applications together. If you need to borrow money to buy a car or a house, make inquiries within a short period of time so as not to affect your rating too much.
Apply for different types of loans such as a car loan, a mortgage, and a line of credit. You’ll show that you know how to manage your financial obligations and that you understand the specifics of each.

To better understand how your credit rating and report affects your requests for financing, consult our Understanding your credit report page.