How can I rebuild credit in Canada after a bad credit rating?
If you can’t get a loan, lenders are probably seeing bad borrowing history on your credit report, which they get from a credit bureau. To get any significant credit, you need a good borrowing history. This page is a guide to quickly creating a good credit rating, even if you have to repair a bad credit rating that exists now
A good credit report typically shows:
- A variety of lenders have given you credit and loans over several years.
- You have always made your payments on time (with possible rare exceptions).
- You have borrowed to contribute to one or more RRSPs, showing that you are planning for your financial future.
- In other words, you have control of your finances, and reliably honour your obligations.
A bad credit report typically shows:
- Some lenders have given you credit and/or loans.
- You have frequently and increasingly failed to make your payments on time.
- You have several credit cards, all at their limits.
- Your borrowing is only for short-term purposes, such as living expenses or household goods, not for longer-term benefit such as an RRSP.
- You may have been bankrupt, or had a consumer proposal, to get rid of debts without repaying.
- In other words, your finances are out of control, and lenders cannot trust you to repay as agreed.
Borrowing is necessary for most people to live an active life, such as buying a house or car. To do so, it is not enough to have a credit report with no bad history, but no good history either. To borrow for major purchases, you need a good credit history.
So, to get a loan of any size, you must:
- Not be in bankruptcy.
- Get the bad borrowing history removed from your credit report.
- Create some good borrowing history.
To know where you stand, you must first get a copy of your credit report, and read it carefully.