Rebuilding Credit: How Long Will It Take to Get My Credit Back?

What is a credit score?

A credit score is a number generated by your past financial information. It appears on your credit report from the credit bureau. Most Canadians will have a credit report with Transunion and Equifax, Canada’s two main credit bureaus.  Your score takes into account:

• The types of credit you have.
• How much of your credit limits you’ve used.
• If there are inquiries for new credit on your report and how many inquiries there are.
• Whether you make your payments on time.
• Additional information like your address, employer, collections, judgements, or if you have filed a Consumer Proposal or Bankruptcy.

A good credit score usually has a mix of credit accounts such as loans, credit cards and mortgages. Generally, if all payments are made by the due date and there are no collections, judgements, Consumer Proposals or Bankruptcies on the credit report, your score will be high.

The items that make up your credit score are weighted, with some having a more significant impact than others. Generally, the weightings are as follows:

• Your payment history accounts for 35% of your credit score.
• The amount of credit you have available versus the amount you use makes up 30%.
• The length of time you have had a credit history comprises 15%.
• Inquiries for new credit accounts for 10%.
• Public records make up 10% of your score.

A negative report from any of these can drag down your score. Late payments, maxing out your credit cards, a Consumer Proposal or filing for Bankruptcy can damage your credit score.

What does my credit score mean?

Your credit score is a number that reflects how well you are managing your borrowing. It generates a credit rating, which helps lenders decide on your creditworthiness. The numbers generally fall into the following categories:

• 760+ – Excellent
• 725-760 – Very good
• 660-724 – Good
• 561-659 – Fair
• 560 and below – Poor

How to rebuild your credit score in Canada

You can take several steps to quickly rebuild your credit score in Canada if it’s low. Knowing your credit score now will help you take the necessary actions to increase it.

1. Check your credit report to make sure your information is correct. You can get a free copy of your report.  
2. Pay bills by the due date.
3. Find out when items were posted to your report. The Financial Consumer Agency of Canada has information on their site that tells you when to expect items to be removed.
4. Catch up on late payments, pay off any outstanding collections or judgements, and keep your receipts as proof of payment.
5. If there are errors, contact the credit bureau to have them corrected.
6. Reduce your balances by paying down your debt. Ideally, you want to owe less than 30% of the available balance of credit cards and lines of credit.
7. Don’t close old accounts. Having a long history with an account can be beneficial because the length of time you’ve had an account open affects your credit score.
8.  If you don’t have a cell phone contract, establishing one can help to build your credit rating. If the provider denies your request for a contract, you can offer to put a deposit down to see if they will accommodate you.
9. Open a secured credit card with a company that reports to the credit bureau. You will make a deposit that the issuer will hold as security. Once you have a history of making your payments on time, you can apply for an unsecured card with the issuer. If the lender approves you for an unsecured card, they’ll return your deposit. 
10. If you rent and you’re a good tenant, you can ask your landlord to have your rent payments reported to Equifax and Transunion. Paying your rent on time can help you build credit and show other landlords that you are a reliable tenant if you need a new place to live.
11. If you don’t qualify for credit, you can sign up for a financial service that reports to the credit bureau as a line of credit, but you use your own funds when you access it. Because the account reports to the credit bureau, you develop a credit rating when you use it.
12. Opening a credit builder loan can help build or repair your credit rating. Some banks and credit unions offer these loans, which are for small amounts. With a credit builder loan, you make the payments first. You’ll get the money once you have made all the payments for the entire amount. Payments are reported to the credit bureau.

Need Help With Your Credit?

Rebuilding bad credit takes time. The amount of time it will take depends on your unique circumstances. If your bad credit results from incidents that happened years ago, it will take less time than if you’ve had credit problems in the last two years. If your problems were minor, you may see significant improvements in your credit score within a year. More severe issues, such as judgments, collections, a Consumer Proposal or Bankruptcy, can take several years to repair.

The Financial Consumer Agency of Canada’s website indicates how long information affecting your credit score will stay on your credit report. You’ll be able to rebuild your credit faster if you make your payments on time, catch up on any outstanding payments and pay down your debt.

Taking steps to rebuild your credit score in Canada can be challenging or impossible if you have too much debt. If you need help with your debt, contact us online at Allan Marshall and Associates or at 1-888-371-8900 for a free consultation. Our team of Licensed Insolvency Trustees will work with you to find the best way to get out of debt and begin to repair your credit so you get a fresh financial start.