Bad Credit
It’s a slow process to repair bad credit.
When you have bad credit, your may not be approved for home mortgage financing. Or, you may have to pay higher interest for your home mortgage. The mortgage interest rate a bad credit borrower pays is typically 1% to 3% higher than a normal good credit borrower. Past bad credit problems like collections on unpaid debts, debt write-offs, overdue and late payments all will ruin your credit. It is in your best interest to know how you can repair your bad credit.
In Canada, credit agencies use a credit scoring system to measure the risk of extending credit to Canadian consumers. The credit scores for Canadians range from 450 to over 850. Poor credit individuals are found to score below 550, and excellent credit individuals have credit scores in the high 700 to mid 800.
Poor credit is a result of poor payment history, bad debts, credit utilization at or near to 100% of credit limits and length of credit history. Late payments will lower your credit rating, but establishing or re-establishing a good track record of making payments on time will raise your credit score.
Common Credit Problems
Knowing how credit works can help you avoid some of the common problems that can affect your credit rating. Very often, you may not even be aware that there is a problem with your credit. Some of the common problems include inadvertent missed or late payments on a loan, credit card or bill and errors in credit reporting. “No established credit” is a problem, as it is difficult for lenders to evaluating your ability and intention to repay your loan.
There are a few simple rules to follow to avoid having a bad credit rating. These include:
1) Regular checks on your credit reports. Mistakes made on your credit report will affect you even though it is not your fault. Checking and reviewing your credit report annually will help you correct such mistakes.
2) No credit score. Find a way to build your credit. Your bank or credit card companies can help. If required you can get “secured” credit cards by pledging equivalent amounts of money to secure the credit limits you desired.
3) Repair bad credit. A loan from any specialized loan companies can help you repair your bad credit rating. But, make sure you keep up with the required monthly repayments. Failure could result in your credit becoming impossible to repair. You should get at least two “secured” credit cards by pledging equivalent amounts of money to secure the credit limits you required. A credit limit of $500 or $1,000 is a good start to rebuild your credit.
4) Avoid making late payments. You must make the required minimum payments before the due dates. It only takes a few months of missed or late payments to ruin your credit.
Managing Your Credit
It can be very difficult to manage your credit if you are in a lot of debt. But, it is important for you to ensure that you make repayments on time. It’s easier to manage your debts than to repair bad credit. If making the minimum or required amounts is a struggle, you have to find a solution. You can do this in a number of ways:
a) Seek to consolidate your debts with a loan.
If you are successful, you will make one monthly payment instead of several payments. You improve your cash-flow when high interest credit cards debts can be consolidated with a loan.
b) Orderly payment of debts
If you are not able to get a bank loan for debt consolidation, there are companies in Vancouver that specialize in negotiating and administrating the monthly debt repayments for you with a nominal administration fee.
If you are planning to buy a home in and around Vancouver, and like to find out whether you can be approved for a mortgage, you can contact James Wong 604-721-4817 at The Mortgage Group for a discussion.
