No matter what the circumstances, a negative credit report will likely prevent you from getting a loan, or even renting an apartment. Luckily, there are number of things you can do to improve it. Credit repair is possible.
Except for in very special circumstances, bad marks will remain on your credit report for up to seven years. After that seven year period, information is dropped from your record. Here is what you can do to repair your credit if you cannot wait for the seven year period to pass:
First, get a copy of your credit report, and find out what is on it. It is impossible to begin addressing your problems if you don’t even know what they are to begin with.
Second, pay all of your bills. If $150 dollars on an old credit card is the only negative mark on your credit report, simply save up that money, contact the credit card company, and make the payment. Paying your debts is the most efficient way of repairing your credit. However, if you find that you are unable to pay off your debts, you may need to consider a debt management plan, a proposal to your creditors. or possibly even personal bankruptcy. (Bankruptcy should be considered your last resort).
Once old debts are dealt with, it is time for credit repair. There are several ways you can do this.
First, borrow fully secured money. Secured loans are those debts you acquire that are backed up by an asset or guarantee (i.e. car loans or mortgages). If you do not pay, the person you owe will sell the “security”. When applying for this type
of loan, credit will usually be granted up to 75% of the value of the security. You could also consider having someone co-sign or guarantee your debt. In this case, they will be granting credit to your co-signor, not to you. If you pay the loan, your credit record will improve, but if you don’t, your co-signor will have to pay.
Second, getting a secured credit card can help you with credit repair. Depositing a certain amount of money on a bank account and pledging the money as security for the card does this. If you do not make your required payments, the bank will withdraw the money from your deposit and reduce your available credit accordingly.
Third, borrow for an RRSP. Banks tend to look at people with RRSPs differently because the RRSPs demonstrate that you are planning for your future. When you receive your tax refund, use the refund to repay the loan. This way, you are paying off the loan faster than is necessary. This will significantly improve your credit report.
Finally, borrow even when you do not need to. Obtain a small line of credit and use it to pay off bills. Then, immediately pay off the line. Repeating this process several times, will help you repair your credit report.
The best advice for credit repair is to pay your bills on time. Do not bounce any cheques, and do not overdraw your account at the bank (even if you have overdraft protection). You want to show the credit system that you are a responsible money manager and that when you borrow money, it is because you want to, not because you have to.