The Ups and Downs of your Credit Rating
The Ups and Downs of your Credit Rating (Photo credit: GDS Infographics)


If you are in debt with a messed up credit rating, all is not lost.


But first, why do you need your credit rating cleared up right now? Are you planning to move? If not, no need to worry about your credit rating, at the moment. Are you thinking of buying a large item, like a car? If not, no need to worry about your credit rating, at the moment.


No one checks your credit rating if you want to go to the movies. You won’t get turned down by MacDonald’s for a Happy Meal. Your friends won’t refuse to kiss you on New Year’s Eve because of your credit rating. You can rent a car, stay at a hotel, buy airline tickets without anyone checking your credit rating.


So, do not get in a panic when a creditor threatens to affect your credit rating! An R1 credit rating is good:You always pay on time, or not over one payment past due. An R9 credit rating is not so good: Debt written off because never repaid. But, these ratings are private, hidden from most of the world. Do not be intimidated to pay more than you can afford in debt repayment by a threat to lower your credit rating. Pay what you can afford to pay, allowing yourself a reasonably pleasant life at the same time.


Of course you will pay off all your creditors, for the negotiated amount, but not faster than you can afford, even if they wave a flaming R9 at you.


Of course, if you do have to move, or buy a car, you will pay higher interest than others. That’s the way it is. Your income will need to handle higher interest until you restore your credit rating. And you will.


When you are in a position to repair your credit rating, here is what you need to do. The first step is to get a free copy of your credit report from both credit rating agencies: Transunion, and Equifax Make sure the information on each is accurate. Sometimes things get on there from someone else’s report, or get left on there when they should have been removed. Make sure you contact them on inaccuracies, and then check again to see if they have made the corrections.


The next step is to pay off all your debts. That could take awhile. But, slowly and surely,you will get there.


Once your debts are cleared, you borrow money from a bank. It may have to be a secured loan, for example, a loan which is secured by your RRSPs or another savings vehicle. Or, it may be a smaller amount, like $1,000.


Once you have the loan, repay it consistently, and on time. This loan needs to be at least for one year. Taking a loan out and repaying it in the next month or two does not show the consistent, timely repayment pattern that lenders like to see. And, voila, you have a new credit history.


Once you have repaid the loan on time, month after month, lenders will have more confidence that you will treat their loan that way.


Think of it this way. You got into debt over time. It is going to take time to get out of debt and repair your credit rating. But in the meanwhile, you need to live a pleasant life, or you’ll debt again. Remember, your creditors are not in charge of your life, you are. You have the money they want. You call the shots.


In the credit repair business, you can easily be your own repair person. You can get out of debt, get a new credit rating, and live a full and happy life at the same time. It is possible. Keep reading.


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