Your credit score is a three-digit number between 300 and 900, indicating your creditworthiness to potential lenders. While a high credit score opens many doors, bad credit impacts your life in more ways than one.
You may already know it affects your ability to access credit or secure a mortgage, but it may also make it harder for you to find a place to rent and make your car insurance premiums more expensive.
If you’re struggling with a low credit score, you may still be able to borrow money using bad credit loans in Canada. However, improving your credit is still important if you ever need a mortgage or credit card. Here are some financial moves to make when you have bad credit.
Become an Authorized User
A close family member or trusted friend with good credit can help you build credit by making you an authorized user on one of their credit cards. You’ll receive a credit card that you can use to make purchases or pay bills, but the cardholder is responsible for the credit card bill.
Becoming an authorized user can reduce your credit utilization and give you the benefit of a long and hopefully good payment history. It’s beneficial if you’re just starting out with credit and have a thin credit file.
As an authorized user, it’s important to remember that any missteps can damage the primary cardholder’s credit. So, talk to the cardholder beforehand about using the extra credit card and only use the card if you can pay back what you spend.
Pay Down Your Existing Bad Credit Card Debt
A high balance on one or more of your credit cards may cause a high credit utilization rate and keep your credit score low. With an aggressive debt repayment strategy, you may reduce an outstanding balance and improve your credit over time.
One way to start is by cutting back on discretionary expenses and directing the money you’ve saved toward paying down any debt. If you have multiple debts, consider the debt snowball strategy. You’ll focus on paying off your debts from smallest to largest. Make minimum payments on every debt but the smallest. You’ll typically try to make more than the minimum payment for the smallest outstanding debt to pay it off as soon as possible.
Make Timely Payments
Payment history is a significant contributing factor when you’re building credit. Many people build good credit by staying on top of their payment schedule.
Ensure you make all your loan and credit card payments on time. You can set payment reminders or alerts for your due date. Furthermore, some lenders require you to have automatic payments, so you don’t miss a payment.
If you think you cannot make a payment, contact your creditor immediately and discuss a repayment plan that works for you. In this case, your goal is to resolve any issues with your creditors before they report your missed or late payments to any credit bureaus.