Step 3

Step 3

Restore your credit

Restoring your credit requires acquiring new credit.

Only new credit acquired after your “release from bankruptcy” will improve your credit score and show creditors that you are able to borrow responsibly.

Make sure your payments are made on time! Keep in mind, do not use more than 75% (50% is better) of your credit available. For example, if your limit is $1000, then do not charge more than $750 and pay it off gradually. Never ever miss a payment.

Using a secured credit card is a quick way to restore your credit rating. Study your options and choose the one that best suits you.

Not all secured credit cards have their payments reported to credit agencies. If your payments are not reported, your credit score does not increase and therefore your credit itself is not restored. Make sure this condition is included before applying for your credit card.

Factors that may cause the lender to be more lenient in approving a loan are:

• • • – A larger downpayment
• – A lower debt – revenue ratio
• – A consistent savings account
• – Reasonable explanations for negative items on credit history

You should increase your credit limit. If you start at the $500 minimum limit, your objective is to increase this limit to demonstrate that you are able to manage a higher credit limit.

A limit of $1500 or $2000 is better than $500 because it demonstrates more reponsibility on your part. You will find that after 12 to 18 months of responsible credit card management, you will probably qualify for an unsecured credit card (no deposit).

What is the best type of credit to start with after a bankruptcy?

Any form of of credit is good credit as long as its transaction history and payments are reported to the credit agencies. A secured credit card is one of the most effective and least expensive methods for restoring your credit. Car loans and RRSPs are also good methods for restoring your credit.