How to rebuild credit 

_{By Bromwich+Smith Staff | 800 words | Reading Time: 4 minutes | Date: 2024/01/11}

Credit. It’s a simple word that creates confusion and stress for many. For some, it’s a mysterious idea based on confusing math and formulas. Credit is a vital part of our financial health. Based on our track record of repaying debt, and having rotating means of debt we are given a credit score which showcases to other potential lenders how capable we are of repaying future debt. If your credit score is low, do not worry. Rebuilding credit is possible with some hard work and dedication.  

Check Your Credit 

The first step is simple, to understand what you need to improve you need to first understand what your credit score is. You can get a copy of your credit score from any of the major credit bureaux (Equifax or TransUnion). Review the report and check it for accuracy. It is not uncommon to see errors, and you can dispute any inaccuracies.  

Understanding what is in your credit report is a task on its own. You need to understand what contributes to your score, including how long you have had each account open, types of credit, how much credit you use, your payment history and more. Once you review your report you will be able to find areas to improve.  

Make Regular Payments 

One of the easiest ways you can increase your credit score is ensuring all bills are paid on time, with no missed payments. We know life can get in the way, making it harder to pay those bills. One easy fix is to automate your bill payments. Set reminders in your phone days before each bill is due, or even set up auto payments with your bank.  

Reduce Balances 

Your credit score goes down if you have a high “credit utilization rate” – the percentage of credit you are using divided by the amount of credit you have available. The goal is to have less than 30% carried over into the next month. So for every $1,000 in credit, you do not want to carry over more than $300 in debt each month. Ensure to not go over 100% utilization as it would mean between carried over balance, new transactions and minimum payment not yet paid you have overspent more than the allocated credit amount.  

To add or not to add Credit 

When you want to increase your score there are two ways to look at the impact of new credit. 
1. Every new hard inquiry (when a lender or company makes a request to review your credit report as part of a loan application process) on your account will show up in your score. It can be a red flag for creditors if you have been opening too many accounts in a small amount of time. Save opening new accounts for when you actually require the credit. 
2. You may consider opening a new credit account if you know that you will not use the additional credit, and accumulate additional debt. The upside to this is it increases the amount of available credit, therefore reducing your credit utilization rate (see above) which would increase your credit score.  

If you are struggling with debt you may want to avoid adding new credit. You may not qualify for it, and if you do, it may add to the temptation to overspend.  

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Secured Credit Card 

Consider opening a secured credit card to help increase your credit score. If you haven’t had a secured card before, you will typically put a down payment onto a card- or pre load the card- with money. That is your limit for the card. You will continue to pay off that credit card, and your payment history is reported to the credit bureaux ultimately helping your credit score.  

Building a strong credit history takes time and commitment. Be confident in the steps forward you are making. While they may feel small they do add up over time and will help you rebuild for the future. For more hints on rebuilding, a credit counsellor can offer you support and guidance along with tips and resources.  

If you are struggling with overwhelming debt, you are not alone. Let’s break the cycle of debt and get you back on track today. A Licensed Insolvency Trustee like Bromwich+Smith can help provide you debt relief programs that suit your situation. During a Consumer Proposal or Bankruptcy, you will have two sessions with a qualified credit counsellor to help guide you on rebuilding your credit and ensure you have the right knowledge going forward.  

Bromwich+Smith has a number of debt relief strategies to help you regain control of your finances and get your life back on track. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s Debt Relief Specialists are available by phone at  1-855-884-9243, Live Chat  or you can request a call back at contact us page. We want to see you flourish!