Tips to Fix a Bad Credit Rating and Get a Credit Card Consolidation

If you need a credit card and have bad credit card consolidation, your options can feel limited. But there are solutions, and you can fix your credit rating at the same time.

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Q: I just started a new job, my third since getting laid off at the start of COVID. I really need this job and they’ve just told me that I have to use my own credit card to pay for my expenses and then submit receipts for reimbursement. I don’t have a credit card right now and I’m worried about applying because my credit was pretty bad. I did pay off lots of what I owed with my ex, but I’m sure there’s still a lot of bad information about me if someone checks my credit. I assume that’s why I lost my last job. Is there any way I can check to see what I need to fix? ~Elliot


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A: Starting several new jobs within a relatively short period of time, during a pandemic, on top of dealing with debt incurred during a previous relationship is a lot to handle all at once. Feeling the pressure to keep your current job is only natural. There is a lot most Canadians don’t know about their credit and the credit reporting system, and this big unknown tends to cause a lot of stress.

One of the best ways to alleviate this unknown is to get a copy of your own credit report from each of Canada’s credit reporting agencies. Equifax Canada and TransUnion Canada will both provide them to you for free. There will be some differences between your reports from the two companies, so it is best to request them both.

Once you have your credit report in hand, read it over carefully. Make sure that the information about your debts is accurate and follow the instructions to have any errors corrected. Keep in mind that you might see some older personal information on your reports. That was the information that was reported at the time you made your last credit applications. In this age of needing to supply more personal information than we have had to in the past, you might assume that the credit bureaus download information about you from various sources; this is in fact a myth.


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The information reported on your credit report is supplied to either Equifax or TransUnion by the lenders you deal with, and the information always pertains to debt. If you applied for a consolidation loan, the information about why you lost your job and needed the loan are not reported. If the loan was approved, then only certain loan details will be reported on your credit file. These include how much you borrowed, what your payments are, and if you make your payments on time or not. If your payments are late, then information about how late you make them is also reported.

When you are concerned about your credit rating, it’s important to get reliable facts about where things stand. Once you know what you’re dealing with, focus on improving or changing what you have control over. Most things on a credit report will fall off after six or seven years. This means that good or bad, your report is always changing and every month you have the opportunity to take steps to improve it.


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What is not on a credit report

Along with the myth that credit bureau companies check into all areas of your life to find information to report, here are four specific things that are not included in your report:

1. Credit applications that are not approved

When you make a credit application, the inquiry itself is recorded in your credit file. Someone looking at your report will be able to see where you applied for credit and if there is a new account with that lender. However, if you change your mind and don’t accept the loan or credit card you applied for, or if you are declined by the lender, that information is not reported.

Top 5 Reasons People are Declined for Debt Consolidation Loans

2. Your medical information

Your medical information, including whether or not you have COVID-19 vaccinations, is not reported on your credit report. If you needed a loan to help pay for medical expenses, the loan details will be reported, but not the condition that caused the requirement treatment.


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Depending on where you got the loan and if the name of the lender reveals what kind of lending they do, there is a slight chance that someone could guess generally what it’s for. For example, if your bank or credit union turned you down for the loan and you still needed the money, if you approached a private lender that is known to grant medical loans, their name could reveal that you or a family member needed money to pay for medical expenses.

The same can be said of dentists. Many dental offices have large bills that they need to collect payment on. If the dentist is listed as the creditor on your credit report, one would assume you had a large dental expense that you were responsible for.

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3. Information about your income taxes

The credit bureaus are not able to request and obtain information from Canada Revenue Agency (CRA) about your tax account. If you owe money after filing your income tax return that debt is not reported to the credit bureaus. CRA is the most powerful creditor in Canada, but they don’t operate the way normal creditors do.

However, if your debt remains in collections with CRA and they are forced to pursue you legally through the courts, any judgment they are granted against you will be a matter a public record and reported on your credit report. Repaying your CRA debts must always come first. If this is a debt you’re struggling with, contact them to work out a reasonable repayment plan sooner than later.


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4. If your income goes up or down

How much you earn is an integral part of your finances. Lenders use it to help determine if they will grant you the credit you’ve applied for or not. Your income allows you make your debt payments, run your household, and enjoy your life. If your income goes down and you’re no longer able to make your contractual payments, your partial and skipped payments are reflected on your credit report. The amount of your income, however, is not reported.

7 More Things That Are Not on Your Credit Report

How to improve a bad credit rating

Improving a bad credit rating takes time. If there is negative, yet correct, information in your credit file it will not be removed. Resist the temptation to fall for an ad or offer that promises otherwise. Everyone can fix their own credit themselves, but it takes time and steady effort. As you take steps to rebuild your credit , that negative information being reported on your file will become less and less important. Once it has been there six to seven years, it will fall off entirely. Here are steps you can take right now:


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Make your payments on time

Catch up missed payments and start making payments on all of your credit accounts on time every month. Use a realistic budget to determine how much you can afford to pay while not leaving yourself short on other obligations and routine expenses. Set up either automatic payments through your online banking that coincide with your paydays or use calendar reminders so that you remember when to make your payments manually.

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Apply for a secured credit card

A secured credit card that reports your use and payments to the credit bureaus is an excellent way to start building a positive track record, as long as you make all of your payments as agreed. Start by saving up a lump sum of money equivalent to the credit limit you want. Most secured cards have fairly low limits, $500 to $1,000, and the amount of your limit is held by the credit card company for a year or two in case you don’t make your payments.


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Use the card as you normally would and be absolutely sure that you make at least your minimum payment every month. If you need a credit card, this can be a good option if you have bad credit. If you can’t save up your security deposit, look to sell some items to generate a quick lump sum you can use.

Government of Canada Credit Card Comparison Tool

Take on a cell phone contract

A cell phone contract can feel like an excessive expense when you’re struggling to make ends meet. However, a cell phone on contract is one of the fastest ways to rebuild a credit rating – and one of the quickest ways to destroy it if you don’t make all of your payments in full as agreed.

The plan you sign up for doesn’t need to be big and you don’t have to be the one using the phone. The bill must come in your name but a basic plan on a contract for calling and texting is all that is required.


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Rebuilding a Credit Rating With a Cell Phone Contract

Don’t make ongoing applications for new credit

Applying for new credit on a routine basis hurts your credit score and rating. Every time you apply it is noted on your credit report because shopping for additional credit impacts your ability to make payments on all of your accounts. After checking your own credit report and taking steps to bring all accounts up to date, wait a minimum of six months before applying for new credit. It will take that long for a future lender to see that you made improvements to your financial situation.

Steps to Fix Your Credit for Free in Canada

The bottom line on fixing a bad credit rating

As you are working to fix your credit, remember to contribute regularly to an emergency savings account. Having money set aside to deal with emergencies means that a crisis won’t erase all of the progress you made to pay down your debts. If you need a credit card immediately, you may need to ask your employer for another way to manage ongoing work expenses. Many people choose not to have a credit card, or the card they do have hovers around its limit. Others don’t have the cash available to apply for a secured card. While a pre-paid credit card doesn’t work in quite the same way, it also must be obtained with a lump sum of money. Unless having your own credit card is a condition of your employment, your employer will need to find a way to accommodate your request.

Related reading:

Are You Missing Out If You Don’t Have a Credit Card?

How to Rebuild Your Credit Rating After Bankruptcy

Common Questions About Debt Consolidation Explained

Scott Hannah is president of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Scott by email , check or call 1-888-527-8999.

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