Having a bad credit score may seem very mundane. Maybe you don’t even know what a credit score is! But when you are ready to buy your dream house or that car you’ve been looking at for months, you will realise that it is the most important element of your financial life.

 

5 steps to rebuild your credit file

The credit score is a number that varies between 300 and 900, and it’s an indicator of the risk level you represent for a creditor. The higher the number, the lower the risk for the lender of not being paid back, and so the higher the chance your loan will be approved. A score over 700 reassures the creditor that you are financially healthy and the chances are good that you will repay your debt. However, if the number is lower than 620 it will be difficult to be approved for a loan.

The score is calculated based on different information: Are you making your monthly payments? Do you already have a lot of debt? Credit card history, number of verifications of your score by other institutions, what type of debt you have. If you don’t take care of your financial health, it’s very easy to find yourself labelled “high risk client” by lenders.

What happens if I have a bad credit score?

You’re not going to go to jail if your credit score is low! It’s possible to improve your situation and get your credit score back on track! But you’ll need patience and discipline. Here are 5 steps on how you can immediately start improving your score:

steps to rebuild your credit file

  1. Analyze your situation: How much and to whom do you owe money? How much are the monthly installments for each lender? What are your payment dates? This will also help you make sure there are no mistakes made by the lender and that no extra fees are being charged to your account.
  2. Make sure you make your payments on time. If you can’t pay the balance of your credit card, it’s important at least to pay the minimum amount required. If you make a late payment or don’t pay at all, it will affect your credit score negatively.
  3. Balance your debts with your expenses. Financial Planners strongly advise to keep your debt ratio under 30%. The debt ratio is the sum of all your monthly payments to your creditors divided by your monthly gross income. If you need to make a budget to monitor your expenses more closely, do it!
  4. Don’t ask for more credit. Every time you apply for a loan or credit card, the lender will check your credit score. If more than 2 debtors check your file, each verification after those 2 will be listed to your file and will impact your score negatively. Lenders may think you are applying for so many loans because you are being refused, and you Are being refused because you can’t pay. That will make your credit score go down.
  5. Apply for a Credit Rebuild Plan at Credit2Go by clicking here! It’s quick and simple! We take pre-authorized debits from your account, we send monthly  reports to Equifax and TransUnion that you are making your payments, and at the end of your term (minimum 3 months) we give you back the money you’ve been saving!

By following these 5 easy steps, you will see your credit score improve in only a few months! Be disciplined and control your expenses!