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Rebuild Your Credit in Ontario After Bankruptcy

If you have been discharged from bankruptcy or otherwise have a poor credit rating, you may be wondering how you can rebuild your credit. Lenders are often reluctant to provide people with poor credit in their records with any credit at all, because they are concerned about your ability to pay. Here’s how you can rebuild your credit after a financial crisis:

Get a Secured Credit Card—Offered By Most Banks

You will need to come up with approximately $500 as a security deposit to have a secured credit card. Choose a card with no annual fees even though the first year’s fees may be waived. A credit card with at least $1,000 - $2,000 limit is ideal. Once you have the card:

  • Spend no more than 40% of that credit, while making regular and timely payments. 
  • Use the card for incrementally increasing amounts and pay in full each time, on time.
  • Don’t use your credit card unless you can pay in full. 

You may be able to have the deposit returned after you pay on time for the first 12 to 24 months.


Limit How Often You Apply for New Credit

Each time you apply for credit there is a “hit” against your credit report. If you are declined, you should consider waiting at least six months before you apply again. The longer you wait between credit applications, the better.


Keep Existing Credit Cards

If you already have a credit card, then do not cancel it, as doing so can negatively impact your credit score.


If You Use a Cell Phone, Get a Contract

Large cell phone companies will report your payment history to the credit bureaus each month.


TAKE OUT A SMALL LOAN THAT YOU REPAY

You can also work to rebuild your credit with a small loan, such as a car loan. Such loans are typically easier to obtain because they involve smaller amounts of money and are deemed lower risk than retail and credit cards because they provide for more basic needs. Setting up automatic monthly payments and overdraft protection can protect you from any missed or late payments.


AVOID COSTLY DEBT

Part of your strategy is to rebuild your credit by forming new habits. Avoid using payday loans and going into overdraft. If you don’t have enough funds to pay your bills, consider other options to avoid more financial difficulty.


PAY YOUR BILLS ON TIME

Never underestimate the importance of paying all your bills on time. While paying your bills will not repair your credit, it helps you to form good habits.


FOLLOW A BUDGET AND SAVE

Following a monthly budget allows you to live within your means. In addition to managing your monthly expenses carefully, you should also put some savings aside for unexpected expenses.


MAINTAIN STEADY EMPLOYMENT

Income stability is important for managing your bill payments. In addition to your primary occupation, try to find more than one source of income (e.g., teaching kids, part-time business, renting out a room or taking on a boarder) as this can reduce your financial stress if you are out of work for some time.

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