Managing and Improving Bad Credit

Managing and Improving Bad Credit

Having bad credit isn’t the worst thing in the world, but it can be tough on your finances. Still, it isn’t impossible to recover from. Many deal with poor scores or insolvency at some point in their lives. But that poor credit can go away if you get your finances in order.

While there is no magic cure for having bad credit, you can definitely overcome it. It take a little time, some patience, and a little bit of financial reform.

What Lenders and Bankers are Looking For

When you apply for credit, bankers and lenders are looking for a few things that will inform them of your risk level. These are:

  • No credit history.
  • Bankruptcies less than seven years discharged.
  • Unpaid collections, unpaid judgements, consumer proposals or orderly payment of debts.
  • History of late payments, foreclosure or repossession.
  • Low FICO and Equifax beacon scores. (Usually under 600 points.)

Bad Credit Will Cost You Money

Most financial institutions will divide their clients into classes based on their risk and creditworthiness. For these companies, lower risk clients will cost less due to lower delinquency rates. As a result, they are able to offer lower-cost services and lending rates.

Those that have low and borderline scores often have a higher average delinquency rate. The costs for these companies is higher and they use credit as an excuse to charge more. When this happens, people with poor scores wind up paying more for the same services than people with good scores.

Credit histories can be completely repaired in seven years or less in almost every instance. TransUnion may retain your financial history for longer, but Equifax only goes back seven years. Creditors realize that people can turn their situations around and are happy to sell their products to those who are now in good standing.

How to Improve Bad Credit Scores

Credit histories can be repaired in seven years or less in almost all cases. Though Trans Union may retain your financial history for longer, Equifax histories only go back seven years. Creditors realize that people can get their financial situations together, and they’re more than happy to sell their products to people that are no longer lending risks.

If you have a credit score of 600 or less, here are a few tips to help you get your bad scores back under control:

  • If you already have a mortgage or line of credit, it’s highly advantageous for you to consolidate your high-interest debts at a lower rate.
  • Don’t forget about secured cards. Secured credit cards are available to anyone with a deposit, and good credit will come from owning one.
  • Make your payments on time. A one-month late payment to a creditor can bring down your credit score 20 points. If you can’t afford the full balance, at least make the minimum payment requested.
  • Don’t apply for unneeded new credit. Every inquiry takes off points.
  • Pay down any credit product you have maxed out. The best situation is to have less than 50 percent of available credit on any product in use or owed.
  • Don’t close accounts that you’ve long had open in good standing. These improve your score. The more you can prove your reliability to a creditor, the better.
  • Get a copy of your history through Equifax or another reporting bureau that can provide such. If there are inaccuracies, you may dispute errors through the bureaus.
  • Don’t go over your limit maximums.
  • Don’t use a third-party company. In Canada, it is not possible to have items removed from your credit bureau by a third-party source. You must wait for the timeframe legally specified in order for those items to be cleared or contact the creditor directly.

Debt Consolidation & Mortgages For Bad Credit

If you feel that debt consolidation can help you, get in touch with a financial professional to help. Don’t pay a third-party company that claims that it can improve your scores by having items removed from your credit report.

In most cases, those repair companies aren’t offering anything ground-breaking and give you information that you could get for free elsewhere. This could wind up costing you money that you don’t need to spend.

If, for whatever reason, time is of the essence, there is financing available for those with bad scores. Most private lenders are not as interested in your score as a conventional lender will be. Keep in mind that you will still likely have a higher interest rate, but you may be more likely to get approval.

Don’t go this process alone. Call Super Brokers to find out the options for obtaining a mortgage with bad credit. There are options available that can keep you from paying too much and methods to get your score back in good standing.