Rebuilding Your Credit

frequently asked questions

Will creditors stop harrassing me? Answers to this and other important questions found here.

Rebuilding your credit is a very comprehensive topic that to do properly really does require us to explain things to you, so after reading this page, if you’d like to obtain more information on this topic and have us help you, be sure to call the number at the bottom of this article.

The most important part of repairing credit is to first educate yourself and fully learn to understand how credit and credit ratings work.  Because when you’ve figured out how all the pieces fit together, then the corrective action of restoring a good credit rating is done by working on eliminating all of the problematic pieces until everything in your credit portfolio shows as being in a good standing.  So to begin with, you’ve got to understand how your credit record works.

.

What is Credit, and how is it rated?

Credit is issued, or denied to people according to how well they do in tests that indicate how much risk they pose to lenders. Creditors and lenders assess risk through the credit rating you hold at the Credit Bureau. And your credit rating is primarily determined by something called a Beacon Score.

.

Things that affect your Credit Rating:

.

Beacon Score

Basically, your Beacon Score is a summary of your credit worthiness and this score is created using an automated system at the credit bureau which typically evaluates 5 areas of concern, and, where the final weight of each assessment factor is affected by each of the other four areas within the overall assessment.

While these percentages are approximate, this list below will give you a bit of insight into how these different factors are taken into consideration.
33% - Past payment history - bankruptcies, late payments, past due accounts and wage attachments
33% - Credit-to-Debt Status – the amount you owe on accounts as compared to the credit limits of those accounts.
12% - Length of time credit established - time since accounts opened, time since account activity
12% - Search for and acquisition of new credit - number of recent credit inquiries, number of recently opened accounts
10% - Types of credit established - number of various types of accounts (credit cards, retail accounts, mortgage)

A beacon score of below 700 is considered not good.  While 850 plus is outstanding, a score of between 700 and 750 is considered good, and in fact, quite often, a score of 650 or more can be increased nicely to a standing of over 700 with only a few simple steps.  But it is always worth working on increasing your score to over 700 because this pays off in better mortgage and loan rates, and the fact that you’ll get a lot less scrutiny from lenders.

Collections

Other factors that can affect your Beacon Score are things such as how many collection notices you’ve received.  Past bankruptcies and any Orderly Payment of Debt arrangements you’ve been involved in.  All of this sort of activity is kept on your credit record for a full six years - or longer in cases of multiple bankruptcies. It is important to pay attention to what is kept on this segment of your file because disputed bills, old, forgotten bills and current collection activity show up here.  Your beacon score really takes a beating if you have an unpaid entry in this section of your Canadian credit bureau report.

Late Payment History

Late payments on your Canadian credit bureau report show up as either an "R", an "I" or an "O" rating. The importance of the late payment shows up as a number from 1 to 9.
A 1 is the best rating. It shows that you have paid your bill within 30 days of the due date.
A "2" Rating (either an R2, I2 or O2) demonstrates to creditors you have an uncaring attitude toward debts. If you have one or two, no one really worries about this, but if you have several of them, bankers start to get nervous.  The general rule is that a "2" rating is not serious, however, loans and mortgages have been turned down with as few as three "2's" if the rest of the mortgage application is not strong.
A "3" rating on your Canadian credit bureau report indicates some financial problems. If it is current, you need to have a good explanation to get the best mortgage rate. If the "3" is one or more years old, you still need an explanation, but many lenders will try to overlook it on an otherwise strong application. If you have more than one "3" at any time within six years it may be a challenge to get the best mortgage rate, but you will still qualify for a mortgage somewhere. A "4" or higher rating on your Canadian credit bureau report means serious trouble. If you have even one of these on your credit bureau report, many banks will not even entertain giving you a loan or a mortgage.

A rating of "9" on your Canadian credit bureau report is as bad as it gets, other than a bankruptcy. Most lenders will not provide a mortgage with someone that has a current "9" rating.

Bankruptcies

A bankruptcy showing on your Canadian credit bureau report is a serious thing regardless of how long ago it happened. If you have only had one bankruptcy, the listing on the Canadian credit bureau report will disappear at the end of the sixth year. However if you have had more than one bankruptcy, all of them will be on your Canadian credit bureau report forever.

Too Many Debts

Many times when the debt load is starting to build up, you may go over the limit on your credit cards.  Credit companies are happy to let you do this once in a while, but your beacon score really takes a hit.  Therefore it is important to remain below 2/3rds of your limit on your credit accounts and even better under 50% of your limit. If you can do this with all your credit sources, the Canadian credit bureau report will reward you with a very good beacon score and the bankers will be chasing you to give you more and more credit at the best terms they can offer.

.

Learn To Be a Great Money Manager

Very likely, the most important but missing component in our current education system is that it does not teach how to make the most of our money.  But if you implement some remarkably simple things in your life, then you can have more money, more time and more peace of mind.  Call us at the number below and let us help you get out of debt quickly and show you how to repair your credit score and on to a positive path because true freedom is definitely a phone call away.