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BDO Winnipeg

100-200 Graham Avenue
Winnipeg, Manitoba
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Phone: (204) 944-4444

How to Kick-start Your Credit Score

After an insolvency, your credit score requires rebuilding. Once your debts have been paid or you have been discharged, you can begin the process of creating a positive credit history. AS our LITs discuss in this podcast, rebuilding your credit is a step-at-a-time step process.

Rebuilding credit after insolvency: where to start?

Recovering from a low credit rating after insolvency requires you to set a foundation of healthy financial habits from the start. It will take persistence on your part since you must prove you are able to responsibly handle credit and pay it back. Here’s where you can begin:

  1. Apply for a secured credit card. You will be required to pay a deposit which will act as your credit limit. For instance, you might pay $500 to the credit card company. They will then issue you a credit card with a $500 limit. However, you will be charged interest on your balance so it’s best to shop around for a good rate and pay off your balance each month to develop healthy habits.
  2. Don’t miss payments. Keep your bills paid each month by setting up automatic withdrawal through your bank account. Make it a habit to pay all bills in full and on time. This includes credit cards, utilities and cell phone contracts. Each one can help you build credit by showing a good payment history.
  3. Limit credit applications. Each time a lender accesses your credit report, your credit takes a “hard hit.” A hard hit signals that you may be experiencing financial trouble and looking to extend your income with credit. The good news is that you can access your own credit report without affecting your credit rating. It is considered a “soft hit” which has no negative consequences.
  4. Wait six months. If you’ve been declined for credit once or twice, wait at least six months before applying again. This will give you time to improve your payment history.
  5. Keep your credit utilization low. Maxing out your credit cards signals higher risk which will lower your credit score. Optimally, aim to pay off each credit balance in full every month or keep it below 30 per cent of the total available credit. Use this credit utilization calculator from NerdWallet as a guide.

A low credit score can creep up over time when you are struggling to reduce debt or having trouble managing money. Whether you’ve filed for insolvency or are looking to turn your finances around, use the above tips as a springboard and be sure to tune into our podcast to learn more from our LITs.

Are you working on rebuilding your credit? Share your experiences on Twitter using the hashtags #MoneyManagement #CreditScore

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