Unless you’re an ace at juggling your credit, never miss a payment, always pay in full and on time – and probably aren’t part of this audience – you’ve likely got at least a blemish on your credit rating.
What Is A Credit Rating, Anyway?
Your Credit Rating is pretty much your adulting report card. It’s a report that will list every interaction you’ve had with a creditor. It will list every loan, credit card, line of credit, lease, and sometimes even rental agreements you’ve had for the last seven years. (Or more depending on the efficiency of your creditor’s reporting procedures.)
Your credit report will show a listing of each individual creditor, how much you borrowed, a history of your payments, how many times you’ve been late or missed payments, and where you stand right now.
It will also give you a history of past credit dealings, whether they’re closed, how they were resolved. This info will go back seven years or more.
Whether you have credit issues or not, it’s always a good idea to check your credit rating at least once a year. Check the sections that list every name you’ve ever used, every address you’ve reported, your social insurance number, and anyone you’ve had joint accounts with. This is crucial to protecting yourself against identity theft. If there is anything, or anyone, listed that you’re not familiar with, report it immediately. It’s hard enough cleaning up a credit rating you yourself have damaged. You don’t need to be cleaning up after some crook has at it.
This is a good link to a page that explains the credit report and what to look for. It’s American, but mirrors Canadian practice quite closely. The entire site has some good info in it, but beware the credit offers and always double check the info against Canadian regulations.
Back to fixing a broken credit rating….
You don’t have to wait until you’re debt free to start repairing your rating. Today is a good day to begin. Here are some tips to start making yourself look good paper again:
- Make your payments on time. Whatever arrangements you have with your creditors, don’t be late with a payment. Make sure you’re posting them from your account at least five business days before the due date to make sure the payment reaches them on time. Even if you can only manage the minimum payment by the due date, pay it.
- Don’t skip payments. If worst comes to worst, call your creditor and explain. You may be able to buy some time or a compromise payment – half now, half next week type agreement – if you’ve run into a rare exceptional circumstance. Be careful with this, though; it can backfire easily. Better to not miss the payment in the first place.
- Get a copy of your credit report. Print it out and hang it on your fridge. Read it carefully, write letters to correct any mistakes – and to have any negative notation more than seven years old removed. (Many creditors won’t bother removing those black marks if they’re not pressured to do so.) Get familiar with the document. Set some goals.
- Plan your budget and stick to it. A routine spending plan is your strongest tool for repairing all of your finances. Plan, implement, tweak, repeat. It’s all about the budget.
- Put together a repayment plan. Review your entire debt situation – collect up all of your bills and loan agreements. Lay them out and work out a plan to pay them all off. Get help with this if you need to. This website is a great start. And I highly recommend the workbook: How To Fight Back From Big Debt.
Fighting your way back onto solid financial footing is no small task. But if you can find and set small achievable goals along the way, you’re more likely to be inspired by small personal successes. Start with a goal to go six months without missing a payment. Then another six. And when your efforts start to show up in your credit report, you’ll feel an extra boost of satisfaction that somewhere out there, someone knows how hard you’re working. And that may be all it takes to make the difference.