1. Get a free copy of your credit report
Credit bureaus sell information; they want you to pay to buy your credit report. Don’t pay for your credit report. By law, you can obtain your own credit report for free. There are two main credit bureaus in Canada: Equifax and Trans Union. Click on the links below to get the forms necessary to get a free copy of your credit report.
- Equifax credit report information page and Equifax pdf request form
- Trans Union credit report information page and Trans Union pdf request form
- TransUnion also now provides consumers with access to their credit report for free online. You simply need to answer a few personal questions to confirm your identity.
2. Review your credit report
To manage your credit report well, it is important that you review the report to determine if it contains any errors or negative comments.
An error may include a debt that you have already repaid (see #3 below). A negative comment may result from a department store credit card that you stopped using ten years ago, but if it had a $10 balance owing, it may still show up on your credit report (see #4 below).
3. Correct any errors on your credit report
If you find an error, contact the credit bureau and offer proof that you do not owe the money. You may need a letter from the creditor indicating the payments were made, or you may provide canceled cheques to indicates payments were received.
You may also send a letter to the credit bureau explaining your side of the story; your comments can be attached to your credit report.
4. Repair any negative information in your credit report
If you owe a creditor $10 and they have filed a negative credit report with the credit bureau, repay the creditor and ask the creditor to remove the negative item from your credit record. If a debt is legally owing, the debt must be paid or discharged before it can be removed from your credit report.
5. Pay down debt and rebuild credit
Even if your credit report indicates that you have made all of your regular monthly payments, a potential lender may look unfavourably on high levels of debt. Creditors usually recommend you should be using only 30% of available credit on revolving loans. This includes debts like credit cards and lines of credit.
A word of caution about rebuilding credit: We do not recommend you leave balances on high interest credit cards just to increase your credit score. Show regular use BUT pay off your balances in full each month. Paying 19% interest is an expensive, and unnecessary way to repair your credit.
If you are using up most or all of your available credit, pay off as much of your existing debt as possible before applying for a new loan. We recommend that you pay off your highest interest debts first, so pay the 18% interest credit card off first, and then repay the 16% interest credit card.
Another word of caution about credit repair: Don’t jump to the conclusion that increasing your credit limit to show you are using less of your available credit is a good strategy. Too much credit all too often leads to too much debt.
Don’t apply for multiple new loans as this reflects negatively on your credit score. If you don’t qualify at first, ask what you can do to repair your credit further and then continue to work on building a good credit history.
6. Take other action
If you have more debt than you can possibly repay, your credit report will only improve by formally dealing with your debts. You may need to file a proposal to your creditors, or consider Ontario bankruptcy. For many, this is often the first step in credit repair even though it may seem otherwise.
We offer a free, no obligation consultation. One of our experts will personally review your situation and answer your questions.
Let us help you choose the correct solution to resolve your debts.Simply contact our team today.