Bankrupt? Smart Ways to Rebuild Your Credit Score in Canada

rebuild your credit score in canada

Bankruptcy should not be the end of the world. Though it is a very rough process to go through and no one ever plans to be bankrupt, the truth is that this happens even to the best of people. It might be a combination of several different factors; poor money management, a serious health issue, poor business acumen, or simply bad luck. The point is that while bankruptcy may be unwelcome, it should also signal a fresh start.

If you’ve filed for bankruptcy and want to start over, you should know that rebuilding your credit score could be quite difficult.

However, you can do it.

It may seem daunting but you can actually begin the task of slowly rebuilding your credit as soon as you receive your discharge from bankruptcy. These tips will help you rebuild your credit score, even after bankruptcy.

Credit Report

Obtain a copy of your credit report and score as soon as you receive your discharge from bankruptcy. You need to see where you stand so you can figure out what to do. First, review it to see if there are any mistakes in the report that you could correct. Be thorough. Report these mistakes. Next, get the reports regularly so you can keep track of your changes. This way, you’ll be able to see if your actions yield results.

Understand that even though your credit score will now say that you have declared bankruptcy, you are also, in most cases, debt free.

So use this point in your life as a time to start over, and approach your finances with a positive attitude, that will allow you to plan for a bright future.

A New Budget

During your term in bankruptcy you were expected to live on a very tight budget, right? Now that your term is complete and you have been discharged you may be thinking that you can ignore that budget and go back to spending like you use to.

But that is not the case. Since you have gotten use to living a frugal lifestyle the best thing that you can do for yourself is to continue to live that way while you rebuild your credit score and rebuild your personal finances.

Take the budget that you were following during your bankruptcy and review it closely to see if there are any adjustments that you can make to it. Perhaps you have found ways to make more money. Perhaps you have found ways to reduce your expenses even further. Make those adjustments now, and plan to follow this budget for the rest of your life.

If you like using Apps there are many different types of apps that you can use to help you manage your finances well.

Open a Savings Account

If you do not already have a savings account exclusively in your name, now is the time to open a new one.

You don’t need a lot of money in the account; start with the minimum. The important thing is to start re-establishing yourself and your financial status by getting in touch with a bank and setting up your account. This signals your willingness to start over.

Save and Invest

As you went over your budget did you find that once all of your expenses are accounted for you will still have extra money every month? In the past that extra money most likely would have gone to debt repayment and interest. But now you have the pleasure of putting that extra money into your savings account. How nice is that?

A good rule of thumb is to save ten percent of your total income regularly. Start saving as much as you can, and work at increasing that amount every month. Think of your savings account as one of your monthly expenses, if you will. When you think of it that way you get into the mindset that it must be paid, no matter what.

Building your savings will help you improve your credit score. It shows financial institutions that you are responsible and manage your money well.

And as you build your savings up, speak with a professional about ways to invest your money as well.

Secured Credit Card

After you setup your savings account and have saved several thousand dollars, speak to the bank you are dealing with and apply for a secured credit card. Don’t be afraid to get a credit card. You might think that this is a bad idea because it gets you into the habit of using borrowed money again.

But having a secured credit card is the fastest way to improve your credit score. Just make sure to pay off your credit card bills on time.

Understand though, that having a secured credit card won’t help you improve your credit score if you fall back into your old ways of poor money management.

Apply for a Loan

Get a loan. As with the credit card, getting a loan is a significant way to rebuild your credit score. The goal is to show that you are reliable and can pay off the money you borrowed. To do so, try to borrow a small amount then save it in a savings account. Pay off the loan steadily and as quickly as you can. This should boost your credit score significantly.

Don’t try to find a shortcut. Bankruptcy should be a wakeup call. Where money is concerned, you should always stay focused and grounded. Forget schemes and “easy” strategies. The only way to start fresh and succeed is to be realistic, hard-working, and determined.


    • DC @ Young Adult Money

      DC @ Young Adult Money 07/15/2013 5:59 a.m. #

      These are all really good ideas and I know a lot of people in the US walked away from their home a few years back and are just now getting that off their record. There are definitely ways to rebuild your credit and I would expect many of these people to jump back in the real estate market and be just fine long-term. Great tips, Sicorra!

      • Sicorra

        Sicorra 07/15/2013 2:05 p.m. #

        Thanks DC! Yes, I think many people will be okay eventually as well. The economy was hard on a lot of people in the last 7 years, but everytime it happens people find a way to rebuild.

    • Laurie @thefrugalfarmer

      Laurie @thefrugalfarmer 07/15/2013 7:20 a.m. #

      Great post, Sicorra. Love the tip about saving and investing. I think so many people, after a bankruptcy, focus solely on rebuilding credit. But in my years as a mortgage sales assistant, we were much likely to lend to a person with a bankruptcy on their record if they had a solid savings account in place. It showed that they had truly changed their money-managing habits.

      • Sicorra

        Sicorra 07/15/2013 2:08 p.m. #

        Thank you Laurie! I wonder if maybe some people forget that having a savings account is a big part of rebuilding their credit, at least in the eyes of the bank. It is part of building a good relationship with a bank, so as you say, they take that into consideration, even if you have a low or a bankrupt credit score.

    • Tanya @ The Heavy Purse

      Tanya @ The Heavy Purse 07/15/2013 4:01 p.m. #

      Great tips, Sicorra. Bankruptcy is often misunderstood. Some people seem to think it erases all their problems while others think it's the end of the world. It's probably somewhere in-between. Done right - you definitely can come out on the other side in a better place, but it definitely takes work but is doable. Thanks again for guest-posting at The Heavy Purse today! :)

      • Sicorra

        Sicorra 07/15/2013 7:18 p.m. #

        Thanks Tanya! I agree, it is often misunderstood, and it does take work to deal with it right.

        I think that is also why a lot of people fear it and do think it is the end of the world. There is so much information out there that only talks about the negative side of it, and people probably expect that they will be homeless if they go that route.

    • Corina Ramos

      Corina Ramos 07/15/2013 6:53 p.m. #

      I never thought of bankruptcy as a fresh start but you're right, it can be. I had considered filing for bankruptcy a couple years ago but we stuck it out and thankfully we made it out of the financial rut. :)

      This is the best advice " Since you have gotten use to living a frugal lifestyle the best thing that you can do for yourself is to continue to live that way while..." and I encourage everyone to follow it.

      Keeping up with our "frugalness" has helped us put money in our savings and that's such a great feeling!

      These tips are great for anyone trying to rebuild their credit. Thanks for putting this together! Have a great day girlfriend! Talk soon :)

      • Sicorra

        Sicorra 07/15/2013 7:21 p.m. #

        Yes, depending on the situation, it can be like starting over. Of course that is only if the debt you have qualifies. Some debt, like student loans, do not.

        It is absolutely wonderful though that you guys were able to sort your finances out on your own. As Tanya said, it takes work and you guys did the work necessary to make things better for yourselves.
        Thanks very much Corina! Have a lovely evening.

    • Thomas

      Thomas 07/15/2013 8:22 p.m. #

      Bankruptcy is a tough situation to deal with. I know a few people that file because of their home and loss of job situation. Many think about building credit but none seem to be focusing on savings and have liquid assets. Banks will want to know you have money if you are looking to buy again. Planning for the future is great and getting back on track means having a budget and doing things a little different then before. I have a few discussions with people who filed and let them know just because you can pay monthly for something doesnt always mean you need or can afford it.

      • Sicorra

        Sicorra 07/18/2013 9:49 a.m. #

        Exactly, you do need to have a new savings account after bankruptcy. If a person is looking to buy again, they can sometimes qualify for a mortgage if they have a large downpayment. Now it may take time to build that large downpayment, but if a person works on it at least they are heading in the right direction.

    • Corinne

      Corinne 07/15/2013 8:27 p.m. #

      Great tips no matter where you live! Hope you have a great week Sicorra

      • Sicorra

        Sicorra 07/18/2013 9:49 a.m. #

        Thanks Corinne!

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