A bad credit history doesn’t have to be a life sentence. While financial missteps like late payments, bankruptcies, foreclosures, and repossessions can linger on your credit report for up to seven years, there are steps you can take to clean up your credit and rebuild your financial health.
“You can absolutely turn things around for yourself,” says Laurie Campbell, executive director of the credit counseling agency Credit Canada. However, she emphasizes that the process requires patience and perseverance—it won’t happen overnight.
Here are Campbell’s tips for improving your credit rating and getting a second chance at financial stability:
1. Sign Up for a Secured Credit Card
A secured credit card is backed by a deposit you make with the card issuer or a financial institution. The amount you deposit typically sets your credit limit. “A secured credit card will show up on your credit history as a regular card,” Campbell explains. “These cards are much easier to qualify for if you have a poor credit history, and they can help you start building positive credit history information.”
2. Apply for a Registered Retirement Savings Plan (RRSP) Loan
An RRSP loan can do more than just help you maximize your retirement contributions. Thanks to its typically low-interest rate, you can repay the loan within a year, which will reflect positively on your credit history. “This repayment will automatically show some positive credit history,” Campbell says.
3. Don’t Act Desperate
Be wary of organizations that promise to fix your credit quickly. “There are a lot of organizations out there that claim they’ll repair your credit record,” warns Campbell. “Do not be a victim and don’t fool yourself into believing it can be done quickly.” It’s important to remember that it’s legally impossible to alter an accurate credit history.
4. Limit the Number of Credit Cards You Own
Even if you pay off your credit cards regularly, having too many can hurt your credit history. “A creditor might see that you have the potential to get yourself into high debt because you have multiple credit cards with high limits,” Campbell explains. For example, if you have five credit cards each with a $7,000 limit, a potential creditor might worry that you could rack up $35,000 in debt, even if your current balances are zero.
5. Meet with a Credit Counsellor
“A credit counsellor can provide valuable tips on how to manage your money better and offer ideas on how to avoid further damage to your credit rating,” says Campbell. Seeking professional advice can be a critical step in regaining control over your finances.
6. Stop Applying for Multiple Credit Lines at Once
Applying for too many lines of credit in a short period can make you look desperate to lenders. “Extensive inquiries in a short time can appear damaging on your credit rating,” says Campbell. It can give the impression that you’re “surfing for credit” or trying to obtain multiple credit lines simultaneously. To improve your credit score, avoid making frequent credit inquiries.
In summary, rebuilding your credit is entirely possible with the right approach. By following these tips and maintaining discipline and patience, you can work your way back to a healthier financial future.
