Let’s take a look at some of the credit repair myths and what you can do now to improve your credit score.
Myth # 1 – I Have Bad Credit… I Just Have To Wait.
Improving your credit needs to start now. Canada’s two major credit reporting agencies can keep data for a long time. The good news is that you can do many things to improve your credit even if your credit report doesn’t look too good now. However, you need to know exactly where you stand to understand what to do.
Request a free copy of your credit reports from Equifax and Transunion and wait for the documents in the mail, or pay a fee online and receive them immediately. Order reports from both agencies, because they aren’t identical.
Your credit report doesn’t include your credit score, but you should pay to see it. It’s not the score itself that gives you valuable information, but the explanation of what affects it. You can then understand which main drivers of your credit score such as payment history, your level of indebtedness or negative information on your file such as bankruptcies, collections or judgments create the most impact.
You might be thinking, “What difference does this make? All any lender sees is my low score,” but when you’re rebuilding your credit everything counts. For instance, you might want to take out a loan or a secured credit card to show you can use credit wisely. You can build a better credit history and lighten the impact of your past problems.
If you have several small debts, pay them off. This reflects well on your credit report too. Focus on what you can do now instead of waiting.
Myth # 2 – Small Errors On My Credit File Don’t Affect My Credit Score.
Even small errors on your credit file can affect your score. You cannot change factual, accurate information, but credit agencies amass huge amounts of data and they make mistakes.
Why should you worry about the little stuff? A 2005 national survey conducted by the non-profit Public Interest Advocacy Center found that 18 per cent of the people surveyed discovered inaccuracies in their credit report.
So what kinds of errors could affect your credit score? The most common is late payment information that should no longer be on your file. This is the last thing you need when you’re struggling to rebuild. You may also find a bill that you paid still showing as unpaid or a discharged bankruptcy appearing as active. Worse yet, there might be information on your credit file that has nothing to do with you.
Check your credit file carefully, and contact the credit reporting agencies if you find errors. It takes time to get errors corrected, but your efforts are worth it.
Myth # 3 – Credit Only Affects Borrowing
Credit affects many things that have nothing to do with borrowing. Your credit score assures companies that you are reliable and trustworthy. Consequently, when you have poor credit, others may see you as unreliable and risky.
The Fair Credit Reporting Act (FCRA) specifies credit grantors and collection agencies can access your file, but did you know many others can too? Insurance companies can view your file if you want them to underwrite insurance and employers can see it if you grant them permission. If you want insurance or you’re eager for a new job, you’ll probably comply.
Running a credit report on a potential employee is standard hiring practice for many companies. A 2012 study published by the Society of Human Resource Management found nearly half employers run credit checks on serious candidates, particularly if they access confidential information, deal with finances or cash, or they will play an executive role.
Your credit file is an important part of your electronic presence. The sooner you start to set things right, the better.
Myth #4 – I’ll Never Be Able To Fix My Credit
Repairing your credit takes time and diligence. Credit reporting agencies don’t take negative information off your credit file until they must legally do so.
The best way to rectify a poor credit rating is to adopt sound credit practices. If you build a good credit history, lenders are less likely to dwell on your past performance.
You may be wondering how this is possible when no one wants to lend you money. This leads us to the biggest myth of all; Myth #5.
Myth # 5 – If I Have Poor Credit, I Can’t Borrow Money
Many mainstream lenders shun borrowers with a poor credit score, but that doesn’t mean you can’t get credit. When a consumer finds they’re at a stage where they have their finances under control, many alternative products exist for those with less than pristine credit.
Rebuilding your credit through a personal loan is a practical way to add positive credit history. Loans are even available for those in bankruptcy or a consumer proposal. There’s no reason not to start rebuilding now.
Products such as a secured savings loan also offer you a way to save. As you make your payments you build up equity against your account balance. This equity becomes available to use as you wish. This is particularly handy for emergencies, but more importantly it allows you to save and rebuild your credit too.
Loans are often preferable to secured credit cards. They offer competitive rates, but you don’t have to pay the cash deposit, usually equal to or larger than the limit they offer. If you’re recovering financially, you may not have that amount of cash anyway.
If you choose a secured loan, you will pay a one-time administration fee, but you may also take out several small loans consecutively. After all, the sooner you can establish a good credit history, the quicker your credit score improves and the less the lenders dwell on your past.
At Creditline ONE, we understand that applying for credit can be scary and confusing and it shouldn’t be that way. We make it simple, easy, and educate you with what you need to know. Let us work for you.
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