Start Repairing Your Credit Rating Now

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.

Alex.

 

Don’t Let Your Debt Kill Your Social Life

One of the hardest things to manage when money is tight is your social life.

Friends call, they’re all going skiing on Saturday. You love to ski. The weather is perfect. The snow is ideal. Whiny Pete isn’t going. Your wanna-BAE is. This is must-do!

Your kids have been talking about a trip to the trampoline park for weeks. All their friends have been. It would sure get them off their butts for an afternoon. And they’ve been so good lately. Gotta do this!

Your wife’s birthday is next week. You know she’d love that new sushi restaurant. And it’s on a Friday, so you can really make a night of it. It’s for her.

Every day brings with it choices about how we’re going to spend our money. And the hardest things to say no to are always the funnest. Here’s some tips on sticking to your guns.

Focus On The Goal

Life won’t always be tight. In fact, without the cost of debt, you’ll free up more ‘fun-money’ than you’ve probably ever had. Sure you’ll be responsible and start your investment and retirement funds. But there will be fun in your future – only if you follow through with the entire plan and get yourself standing on a rock solid foundation.

Get Your Peeps On Board

Tell them what’s going on. You really want to do these things, but you’re working a plan. Things have been going a little sideways, and you’re working hard to get them back on track. Ask them to keep you on the invite list for the future – you’re in, you’re just a bit picky for now. Explain the program to the kids. Get your significant other to partner up with you. You don’t have to give details and numbers. But chances are, they’ll understand.

Research Cheaper Options

The Internet is a wealth of information. Use it to find less expensive options, alternatives, and ideas. Kids love nature. Parks and picnics can be incredibly romantic. And there’s almost always a coupon or deal to be had.

Living in debt can be frustrating and defeating. But it doesn’t have to be. With a little imagination and compromise, and a healthy dose of determination, you can create some of your best adventures.

And feel free to share your suggestions in the comments. Ideas are gold!!

Alex.

Avoid ‘PayDay Loan’ Hell

One of, if not the, biggest pet peeve of mine is the Payday Loan.

I live in Hamilton Ontario, and our city is the first in Canada to limit the number of these pop up loan sharks who feed on the desperation of our most vulnerable citizens. It’s a start, but barely. It. Makes. Me. Crazy.

You know the tactics: “$300 for $20,” “No credit record denied,” “Solve your money problems with a $1,500 loan today.” UGH!

The bottom line is, there is no way these bandaid solutions will help you. In fact, very quickly, they can make your life a living hell.

Without a deep-end math lesson here, let me throw a few numbers at you.

Let’s look at the $300 for $20 deal. It’s a 2-week loan. You go in, fill out some paperwork, give them your banking info, and walk out with $300 cash. Feels great. Easy peasy.

Two weeks later – at the end of the month – they have access to your bank, and promptly reclaim $320 from your account. This never feels good. Mostly because you likely can’t spare the extra $300 from your income, and will come up short again next month. Two weeks from now, you’ll be back borrowing another $300. Only this time, you don’t qualify for the New Customer Special, and it’ll cost you $50 for the loan.

Of course, if you can’t pay it back, they’ll roll the loan over into another two week loan, and charge you $50 on top of the $20 you already owe. Even if you’re able to pay back the loan a month later, you’ll be out almost $400. This gets ridiculous really fast. They just keep lending you the same $300 – money that, technically, you never pay back – and they keep collecting the $20-$50 from you every month. It’s actually better for them if you don’t pay it back.

If there was a way I could take $300 of my money, and invest it so that I make $50 a month off of it, I would sell my first child to come up with the cash.

(Okay, maybe not a kid, but seriously, I’d find the money!)

Over the course of a year, that’s a return of 200%!!!

A good investment planner will tell me that 5% is a solid return on the use of my money. 15% is stellar!

200% is black magic. Legally, 30% is considered Loan Sharking.

And the Payday Loan places get away with it because they call it an ‘administration fee,’ not ‘interest.’

If you’re already in to these guys, do everything in your power to pay them back. And never go near them again. Follow my budgeting and credit tips here on this blog to help get on track so that you don’t need to borrow.

Fact is, if you are in a position where you need to borrow from a Payday Loan outlet, you CANNOT AFFORD to borrow from a Payday Loan outlet.

This is probably the best advice I could ever give you. Ever.

Alex.