Repairing or Establishing a Credit Rating

In the industry, we call it Financial Rehabilitation.

Many of us may not have fit the criteria for a loan application. There can be many reasons for this. If you have no job, no collateral or your Total Debt Service Ratio (TDSR) was too high the answer is fairly straight forward: you need to earn more or spend less.

But what if you were declined for a loan on the basis of your credit rating alone. It happens. It happens a lot. Major financial institutions are not risk takers. You can be declined for a loan for the sake of one R3 on your credit report. (R3 means paid in more than 60 days from payment due date, but not more than 90 days, or three payments past due, in the past 7 years). There is a growing number of people whose credit rating is the reason for holding them back for any access to credit. But this can be remedied.

If you have been previously bankrupt, have had certain debts written off or sent to collection, have been a slow, erratic payer or even if you have no credit history, then you can start putting things right, today. There are many strategies with Which to achieve this goal. I am going to outline the two easiest and accepted methods. Both involve. . . asking for credit!

Credit Card Application

As ridiculous as it may seem. a credit rating can be bought (to an extent). The ratio in the institutions is 2:1. If you want a credit card with a $ 250.00 limit, you will need $ 500.00. Approach you banker, and at the same time as completing a credit card application, purchase a $ 500.00 Term Deposit. The bank has their security and you receive your credit card. Better yet, you have just accessed credit and triggered a brand new R1 on your credit report. Be sure to keep payments up to date to keep that R1.

RRSP Loan

This method involves approaching your bank and taking out an RRSP loan. There is no risk on the bank's part for this type of loan as they do not extend any cash. You simply begin paying the bank $ 50.00 (or whatever) per month in exchange for the paperwork on your tax shelter. Again, better than the savings or the tax benefit, you have just triggered another brand new R1 on your credit rating.

Suppose your credit rating was the problem but income was stable and your budget was even allowing you to save $ 100.00 per month. You could apply for two RRSP loans at two different banks resulting in two new R1s on your credit file. Suppose, in March, you received a $ 1,000.00 income tax retum. Why not purchase two Tenn Deposits at $ 500.00 each at two banks and apply for two different credit cards.

You're on your way !