Less-than-Perfect Credit? Here Are Tips that May Help!

Being “perfect” is quite an ambition. It’s more common to be less-than-perfect in our everyday, human lives. Take credit scores for example. Most Canadians do not have a perfect credit score. And that’s okay. Striving for a better credit score is a good goal, especially if you want to get a Line of Credit in the future. You can read more about credit scores in our blog, What Is a Credit Score? Stay positive and keep reading for tips that may help!

What's a Line of Credit?

First, let’s explore what a Line of Credit is! This type of loan is known for its flexibility and convenience. Once the application has been submitted and approved, the borrower is given a specific credit limit. They can borrow the whole amount all at once or just what is needed. As the borrower makes payments on their loan, that money replenishes the credit limit amount, except for the interest paid on what was borrowed. The Line of Credit stays open as they borrow, pay back, and borrow again. Read more in our Line of Credit blog.

Track Your Finances

Sure, you may check your account balances or keep a monthly budget, but digging deeper could help you stay financially informed if you’re preparing to apply for a Line of Credit. Below are some habits you can build into your routine.

• Check your free credit report – Go online to Equifax Canada or TransUnion Canada to request your report. Both credit bureaus allow monthly access to your free credit report online. Review your report and notify the bureaus of any discrepancies.
• Review your accounts and bills – On time payments and payment history are big factors when it comes to credit scores. If you’ve missed any payments, communicate with the payee to work out a payment arrangement.
• Debt-to-credit ratio – If possible, try to keep your debt amount lower than the amount of credit you have. If you max out your credit, it will poorly affect your credit score.

Track Your Finances

It may be a good idea not to put all your eggs in one basket and shoot for a large loan. By taking small steps on your loan journey, you can build up good credit history with on time payments.

• Try applying for a small amount – You might have a better chance of receiving a small loan versus applying for a large amount with more risk to the lender.
• Stay responsible – By sensibly using the loan, you can create good credit habits that will help you in future financial situations.
• Small loan, large impact – Regardless of the size of the loan, making your payments on time, every time could help your credit.

Steady Income

When you have reliable income, a lender may view you as capable of repaying your loan in a timely manner. There are several types of income that could be used when applying for a loan. But it is best to verify what proof of income your preferred lender accepts.

• Keep your records handy – Secure your proof of income in a safe and memorable place.
• Here is a generalized list of common options:
• Proof of recurring income/work pay stubs
• Letter of employment
• Bank statements showing payroll deposits on a regular basis
• Retirement income like CPP/OAS statements
• Employment Insurance/EI sickness benefits
• Disability benefits

Reduce debt

If you have the capacity to reduce your debt, it could be a good option to explore. Be practical and take the time to evaluate your income vs debt.

• A lot of debt can impact credit scores and future loan approvals.
• Create a budget to find where you can cut back, and which payment amounts you can increase.
• If a payment plan would be beneficial to you, reach out to the payee and communicate your situation.

Time and Effort

Less-than-perfect credit, or even poor credit, doesn’t have to mean no options. By doing some research, continuing to be financially responsible, and adding a couple of tips to your money-handling routine, you could bring yourself closer to your Line of Credit goal!