All my articles this week have shown how you can find out your credit history and score, and what you can do to improve it. But what if you have no previous credit, or some of your accounts went to collection agencies and now no one will give you credit? There are a few steps you can take to build or rebuild your credit file.
First of all, if you have accounts on your credit history that are in bad standing, getting them paid off and closing the account as soon as possible is a good idea. Your credit file will purge the account 6 years after the date of last activity so the sooner you get it dealt with, the sooner the clock can start on it disappearing from your credit report. The 6 year rule even applies to bankruptcies, so no matter how bad it gets, you can improve your credit over time.
One of the easiest ways to get credit is through a secured credit card. These are really just regular credit cards but you provide a deposit equal to the limit you want for your card. This covers the bank from the percieved increased risk of someone with either poor or no history. Not only will it give you new credit to improve your file, since you’ll now have a credit card you can benefit from beng able to rent a car, book a hotel room or order online. Capital One offers a MasterCard that has a minimum deposit, and therefor credit limit, of $75. HomeTrust offers a Visa with a minimum deposit and credit limit of $1,000.
Having a chequing or savings account with a bank can improve your chances for a loan. While it’s not something that gets reported to the credit bureaus, having a bank account without any NSF charges or frequent overdrafts will show your responsibility and your ability to manage money.
Another thing banks will look for is stability. The longer you have worked for a employer increases the chance that you’ll still have a job when your bill is due. The longer you’ve lived in the same place decreases the chance that the banks won’t be able to find you.
And finally, while not always at the best rates, you might find it easier to get a car loan or a credit card for a retail store. Both of these types of credit have an extra incentive to the person considering your application, that it increases sales for their business.
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Tom Drake is the owner and head writer of Canadian Finance Blog.
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Great article and you’ve covered your tracks by showing users how they can check their credit score, history, etc.
So the next step? Well, if you’re debt free or relatively close, why not earn money with credit cards? Check out our article here: http://colourfulmoney.com/?p=35
Cheers!