There are a number of events that can leave someone with bad credit. Bad financial mismanagement early in life is one. Job losses, health problems and business failures can leave us with more debt than we can pay. When that results in bankruptcy or consumer proposals, your credit will be severely damaged. This is why you want to take steps to repair your credit.  

A good first step is opening two new valid credit facilities and then using them intelligently to repair your credit. The simplest option is to open a secured credit card with a low limit, since this is the easiest type of card to get after a bad credit event.  

Can you ask your bank for a secured credit card? 

Some banks don’t have secured credit cards at all. Others do have these cards, but they aim them at young adults just building their credit. You have to ask them to give it to you after your bad credit event. You’ll need to explain that you’re trying to rebuild your credit. You can break through barriers by offering to put up collateral to get their card. If they approve it, the money will probably be put in a term deposit or GIC.  

Why is this approach a viable solution

A basic secured credit card can be grown by increasing your deposit. As you use it responsibly, the lender may automatically increase your credit limit. After a few years, you may have $3,000 of credit and get your deposit returned to you. The slowly growing credit limit and good payment history with an established account improve your credit score. More importantly, good payment history on a line of credit established after the bad credit event is seen as a vote of confidence in you. This increases the odds other creditors will loan you money. Conversely, creditors like Grande Prairie mortgage lenders and car companies won’t lend you anything if the only line of credit you have remains at $300. 

How to Boost Your Credit  

Increase the limit whenever you can. You may have to ask if the lender doesn’t automatically increase it.  

Have two cards but not more while you’re trying to repair your credit. Seeking multiple lines of credit can backfire, whether it results in missed payments due to disorganization or lenders concerned you’re overspending.  

Don’t overspend. Your secured credit card is a dollar for dollar arrangement. If you over-spend, it will hurt the credit you’re trying to build. Find other ways to pay the bills rather than hitting your credit limit.  

Don’t spend money you just deposited. It may take time for the credit limit to update. Pay your bills on time. Ideally, you should log in and pay it off almost immediately so that you remain on top of your bills. This also ensures that you don’t go over the limit because you forgot to account for some expense.  

Try not to let it go over 30 percent. That low credit utilization ratio is a point in your favor.  

Use the card frequently. Regular use without going over it shows that you can handle money.   

Why do I need new credit? 

There are people who hold on to their old credit cards and debts like a cell phone bill after the bad credit event. These bills do need to be paid on time and ideally paid off to repair one’s credit. However, that doesn’t have the same positive impact as a properly managed new credit. For example, Grande Prairie mortgage lenders love to see well-managed, steadily improving credit after the bad credit event. This shows progress. Move up to a car loan, and eventually, you’ll be considered eligible for a Grande Prairie mortgage.  

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