How to have good credit file? How to rebuild your credit?

Service providers (electricity, internet etc.) and potential lenders you had business with often send you information about your accounts (balance, payments etc.) from Equifax and TransUnion. Those are two major credit rating agencies in Canada. Your credit rating will then be allowed based on the information sent. The rating system is shown in points between 300 and 900 and a rating from 1 to 9

The higher the score (points and rating), the better your financial health is considered and the least risky it is to allow you a loan.

How to read the different ratings?

• 1 rating:It means an account is paid on time. For each month late, the rating will go up 1 to a maximum of 5
• 7 rating: It means the account is under a payment arrangement with the creditor
• 9 rating: It usually means the account is bankrupted or it is in legal proceeding to secure payment

1. Close any bank account you don’t use. Too many accounts often scare financial institutions even if their balance isn’t negative. They will take in account the possibility you can go into a compulsive spending spree using all your credit cards.
2. Do not go over the credit limits. Having a $1500 limit doesn’t mean you should use $1490. This will increase your debt-equity ratio. We suggest not to go over 50% of your limit.
3. Reimburse your high interest rate debts first. They cost more, so you should pay them first.
4. Make a simple budget. This isn’t original but it works. With a budget, you will plan, which reduces the risk of spending too much and getting into more debts.
5. Consult your credit file.  Every 6 months, or yearly. Few people think about it but it’s the best way to anticipate your future financing demands. You can consult your credit file for free on the canadian government website
6. Spread your financing applications. Having too many applications in a short period can weaken your credit file and make the creditors hesitate.
7. Only become guarantor for people you trust. Wanting to help a friend or a family member is noble but be careful, if that person bankrupts the debt falls onto you.
8. Save money. Again, it may seem obvious but it’s very important for financial institutions and credit agencies. Putting a small amount each month in a savings account sends creditors a positive message and help you in case of and unexpected job loss or anything unexpected. Your never know what tomorrow will bring.
9. Fix your mistakes in time. A delay in payment can stay up to 7 years in your credit file. That’s a lot but not unfixable. With discipline, you can make it. Our car loans often allow our clients rebuild their credit file.
10. Always pay the minimum amount on your credit bills.  If you can’t pay the whole amount on time, it’s a ground rule you should always have.