Alright, so you’ve got bad credit, it happens to the best of us. The challenge is now your credit rating stands between you and home ownership, so what are you gonna do?
Start by asking your broker/bank for a copy of the credit report they received, or you can look into getting your own copy from Equifax, Experian, and Trans Union (www.Equifax.ca) and see what’s on it. Check it for accuracy, someone else mistake should not be the one dragging you down, and there are errors contact the billing/accounting departments of that creditor to get the issue resolved.
Avoid bankruptcy if at all possible; it shows up on your credit for 10 years. Don’t take the easy way out now, you’ll pay for it later. It takes a lot more hard work and dedication to rebuild your credit than it does to declare bankruptcy, but you’ll be glad you did.
Now look to get your account balances below 75%, this is one of the issues that relects badly on your credit, when you’ve got a credit card, credit line, ect and it’s almost maxed out it makes people worry. So bring those balances below 75% and make your payments On Time. If this is an issue look at creating a budget, and a payment calendar. If you can’t make your payments, be honest with yourself, you may need help so look for some credit counselling. Contact your creditors, explain the situation and ask for a lowered payment plan. There isn’t a lender out there that wouldn’t rather get some money from you than no money from you. (and if you do work out an agreement, Get it in writing.)
Once you get those debts under 75% look to move higher interest balances (credit cards, ect.) into lower interest accounts (credit lines, bank loans, ect). Be sure to keep some of your credit accounts open, one major factor in your credit score is the length of credit history so consider keeping the older accounts open. (Having 5 accounts with zero balance on four and $500 on one lowers your credit risk, as opposed to 2 accounts with a $250 balance each.)
Pay off the debts, pay the minimum, pay on time every month, and pay extra! Every time you pay off your lowest balance is an occasion to celebrate then add the amount of that payment to the next lowest balance.
Other Articles in the Owning a Home Series:
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