Having a poor credit rating is not only a nuisance, but it can have serious repercussions for other areas of your life as well. For instance, you may experience difficulties getting an apartment, buying a car, experience higher insurance premiums, and much more. There are many causes of a poor credit score, including job loss, high unexpected health expenses, separation or divorce, or costly home repairs. A major cause of poor credit is missed payments resulting from consumer debt, and each day you are late your score may get worse.
If you can make small changes in your life to ensure your debt payments are made on time and in full, you will significantly improve your situation over the long term. If full payments are not possible, even minimum payments made by the deadline are better than none. To better understand and manage your credit, you may wish to seek out credit counselling in Ottawa, Brockville, and surrounding areas of Eastern Ontario to get back on track.
Know the Possible Contributors to a Poor Score In order to change your credit score, it is important to recognize what may be influencing it. Using most or all of your available credit on a regular basis and reaching or exceeding your limit will naturally impact your rating in a negative way. Irresponsible spending habits and numerous missed or late payments will also factor in to a poor credit score.
If you regularly obtain new credit accounts or only have one type of credit, you may not be effectively demonstrating strong money management skills. Furthermore, lenders could zero in on how often you apply for credit, which is easy enough to reverse by simply reducing the number of applications you submit. To get an understanding of your current situation, you can request a credit report free of charge and review your spending habits.
It may seem ironic, but having no credit history of owing money and paying it back will also contribute to a low score – simply because you have no record. The quick fix is obtaining a credit card and making responsible purchases, followed by regular payments. Learn How Credit Scores Are Calculated Although there is not an exact method publicized for how credit scores at TransUnion and Equifax are calculated, it is known that credit scores are primarily based on a few specific factors. Payment history, including your spending habits and how often you pay on time and in full will contribute to your score. If you make regular, timely payments, this will be beneficial to your score. Similarly, missing or making late payments will have a negative influence.
Your credit utilization number measures how much credit you actually use each month from the amount available to you. As mentioned, reaching your credit limit regularly will not bode well for your credit score.
The length of a good credit history has merit. If you have maintained the same credit accounts for a long period time, these accounts will factor positively on your credit score than consistently getting new ones.
A further consideration for your credit score calculation is to examine how often you apply for credit. The frequency in which you seek credit indicates your financial dependency – or lack thereof – on credit. Maintain a Steady Income and Assets A steady job and residence is another way to give lenders more confidence in your ability to pay debts if you go into arrears. Build a Good Credit History If you have no established history, then you may want to start with a small RRSP loan that you can pay off relatively fast and build some credit in the meantime and enjoy the tax savings you will have from making a contribution. As another option, you can apply for a secured credit card that takes a deposit as collateral if you happen to default.
It is also ideal for you to have a mix of account types, such as a mortgage or car loan where you make regular instalments to pay these amounts and revolving accounts, like credit cards where your payments change each cycle. Having a mixture of accounts shows if and how you can effectively manage both types of credit. Save Emergency Funds Setting up an emergency fund with money to cover about two months of expenses can help you tremendously in the event of job loss or serious illness.
Become Conservative with Your Spending Habits Although having more than one type of credit can be good, it is important to only keep one card while you are struggling to manage your finances. This strategy can be helpful to limit your purchases and make it easier to track your spending habits. Having one credit card will also help you to build a stronger history with a single creditor.
Seek Out Credit Counselling in Ottawa to Manage Your Spending A Licensed Insolvency Trustee (LIT) can review your finances, help you manage your spending, and propose a few options to assist you over the long term. At D. & A. MacLeod Company Ltd., credit counselling is a service you may wish to take advantage of to begin rebuilding your credit. Another option you can explore is for a LIT to represent you for a consumer proposal, depending on your personal situation and debt load.
Contact D & A MacLeod Company Ltd. for Debt Help in Ottawa At D. & A. MacLeod Company Ltd., we offer comprehensive debt help for residents of Ottawa and surrounding areas. With 8 offices, including our locations in Brockville, Cornwall, Kanata, Kingston, Orleans, Pembroke, Ottawa and Smiths Falls, we are equipped to provide professional and strategic guidance. Besides credit counselling, we also offer assistance with bankruptcy and consumer proposals.
Contact us today online or by phone at 613-236-9111 to set up your free, no-obligation consultation.