Does your credit suck? Unfortunately many Canadians are finding themselves in the same predicament. The interesting thing is that while some people monitor their credit score on a regular basis, others never look at it. And then one day they go to apply for a mortgage or a new car loan and they are shocked to find out that they are denied because their credit sucks.

Why Would Your Credit Suck?

Your credit score could be a mess for a number of reasons.

Perhaps you’ve never had a credit card or a loan in your name, and therefore you have no credit history.

Other reasons could be because you have delinquent accounts, meaning you are behind on repaying your loans, including any credit cards. Even a few late payments can affect your credit score.

Maxing out your credit cards is a great way to quickly reduce your credit score, as it makes you look like a high risk.

Closing credit accounts that you felt you no longer needed also decreases your credit score as it erases your good credit history.

The most obvious reason that your credit sucks is because you declared bankruptcy in the past 7 years.

So Now What?

If you recently found out that your credit sucks there are a number of things that you can do to improve it.

Improve Your Credit Score

New Credit Card

If you do not have any credit at all, approach your bank and apply for a new credit card. Your first card may have a very low limit such as $500 or so, but after you use it and pay it off on time you will find that your bank will eventually increase your limit.

Credit Report

If you have credit cards, pull a copy of your credit report and score and review your accounts to make sure there are no errors and that all of the accounts that are listed are in fact yours.

Then add up what you owe and create a budget that will allow you to pay down your debt.

If you find items on your credit report that are incorrect you need to get them removed right away. You have two choices on how to handle that. You can contact the credit bureaus yourself and dispute the items or you can contact a credit repair company and ask them for assistance.

Old Credit Cards

If you have a credit card that you have not used in a while, dust it off and start using it again, but use it responsibly.

Bankruptcy

Improving your credit score will be harder if you declared bankruptcy, but you should get to work on it as soon as possible.

The first thing you can do is visit your bank and apply for a secured credit card, either Visa or Mastercard.

Yes, you will have to hand over some cash to get the credit card, but your bank will hold that as a security deposit. You will use the secured credit card as you would any card. Make purchases and then pay the amount owing before the due date.

Ask your bank how long they will hold the deposit for.

Typically the answer is one year, if you consistently make your payments on time.

Department Store Credit Cards

You can also try applying for a department store credit card as people have found that it is easier to be approved for a department store card than it is to be approved for a Visa or Mastercard. Again, use this card responsibly to rebuild your credit score.

Family Member’s Credit Card

Another option is to sign on as an authorized user on a family member’s credit card account. Of course this only works if that family member agrees and if they have a good credit score.

This could be a spouse with a good score, or perhaps your parents. If they practice good credit habits you will benefit from that.

Demonstrate Responsibility

Show lenders that you are responsible and can manage your money well by paying off your loans and credit cards on time every month. This will help you rebuild your credit history, which in turn, will increase your credit score.