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Repairing Your Credit
Many people are afraid they won’t be able to get credit ever again if they declare bankruptcy. This isn’t true. Declaring bankruptcy will put an R9 rating on your credit score (the worst possible) and that notation will show up for 6 or 7 years dependent on the province. However bankruptcy will also clear all of your outstanding debt, and low levels of debt make you a more attractive borrower.
After you are discharged you can start rebuilding your credit rating, and after a few years, as long as you have shown good borrowing behaviour it will become easier for you to get credit again.
So how can you build up your credit rating?
- Open some kind of credit account. Immediately after bankruptcy your options will be limited for this so start small and do not make multiple applications. A secured credit card is often a good option. In order to build your credit score you have to be using credit so somebody can be reporting your good behaviour. If you simply don’t use any credit the only thing on your report will be your bankruptcy, and that doesn't look good
- Pay your bills on time – unpaid or late bills show negatively on your report. Showing reformed behaviour and the ability to handle your finances will help build
- Be smart with your credit – if you have a credit card don’t let it get out of hand. Allocate it for one or two specific types of purchases and pay off the balance every month. For example put all of your gas, insurance and car maintenance on it, or all of your household groceries. Limiting to one kind of spending will stop you getting over your head and can also be useful for tracking costs.
- Start saving – Having a larger deposit for purchases you need financed will make getting credit for the remaining balance easier in the future. Putting money into savings will also ensure you have funds to fall back on in an emergency instead of relying on credit.