How can I rebuild my credit when I’m in debt?

The debts you have accumulated influence your credit score, but there are other factors. The use of credit granted payment history, and credit investigations can all influence your credit score.

We have asked our Fairstone Financial partners to provide advice to those in debt who want to rebuild their credit.

Keep your credit card balance at 25% of your limit or less

Even if you make your payments on time, a high credit card balance will hurt your credit score. What exactly do we mean by “high balance”? As a general rule, if you use more than 25% of your available credit, your credit score may drop.

You can request that your card limit is increased to reduce your usage percentage, but if you are denied such an increase, or if you have difficulty paying your balance, you may want to consider consolidating your card. credit card debt to facilitate repayment management.

Limit purchases on a credit card to a few predetermined expenses per month

Another way to reduce the use of your credit is to only carry a certain number of predetermined monthly expenses to your credit card (in addition to making sure that these expenses represent 25% or less of your limit). This will help you improve your credit score and ensure that the amount you have to pay each month is predictable and can be managed, which will also improve your payment history.

Set up automatic payments to pay your bills on time

Some people are surprised to learn that their balance and payment history for common bills such as telephone, television and the Internet is passed on to credit reporting agencies. Whether you are in debt or not, a missed or late payment may result in a decrease in your credit score. We suggest you set up automated payments to avoid missed payments. Over time, this will help you improve your payment history and credit score.

Combine multiple bills into one monthly payment with a consolidation loan

Do you have difficulty managing multiple debts and payment dates? A debt consolidation loan allows you to make only one payment for various bills. By having to worry about only one monthly payment, you increase your chances of making your payments in a timely manner. Such a regular payment will not only help you improve your credit history but also help pay off your debt faster.

Reduce solvency investigations to a minimum

A solvency survey can take many forms, such as applying for a loan or mortgage loan or an apartment rental application form. If you want to improve your credit score, you should wait between three to six months between solvency investigations, because a higher number could tarnish your credit score.

If you want to avoid solvency investigations, be wary of situations that could lead to such investigations without you expecting, such as shopping for a car. If you go to a used car dealer just to take a look, an employee might ask you for some information that would allow him to complete a registered credit check, which he can do even if you did not the intention to make a purchase. In all circumstances, make sure you ask the person if they intend to complete a registered credit survey before providing them with your contact information or your Social Insurance Number.

Remember that repaying your debts is not the only way to improve your credit score. It’s also important to consider other factors that influence your credit scores, such as your payment history, credit usage, and credit surveys, to put you in a good position to improve your finances.