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Rebuild your credit score in 2021

Rebuild your credit score in 2021

Most of us will be glad to see the end of 2020. To say it’s been a tumultuous year is something of an understatement. So, it is with positivity and anticipation that we look ahead to the new year.

What better time to rebuild your credit score than a new year with new opportunity? Even if you’re not planning to get a car loan or borrow anything, it’s still a great time to improve your credit score.

Here’s how.

Take stock

Before we begin the journey to a better credit score, we first need to know the position we are in. Check your credit report. Make a list of all the debt you have and the various rates of interest you’re paying.

From here we can build a plan for managing everything and rebuilding that credit score.

Pay off any debts you can

If possible, try to pay off the most expensive debts first. That will usually be a credit or store card. You should know what rates you’re paying for what from the discovery phase.

If you can pay any of these debts off, do so, beginning with the most expensive. If you cannot pay any off right away, begin paying those expensive debts off as a priority.

Set up automatic payments

If you don’t already have automatic payments set up for debts, do that next. Payment reminders are all very well but we all know that life gets in the way and likes to throw a curveball every now and then.

Missed payments make the biggest single dent in a credit score so we want to avoid this if at all possible. Automatic payments and ensuring there’s money to cover those payments is essential.

Address your credit utilization ratio

Your credit utilization ratio is a calculation of the amount of available credit you are using. Use too much of this credit and it will impact your credit score and possibly prevent you qualifying for that car loan.

To address your credit utilization ratio, you have to pay off debt.

Consider consolidation

You may think borrowing more isn’t a good way to manage debt but a consolidation loan is different. It’s a personal loan you take to pay off all your debt. You go from managing multiple payments and creditors to a single payment and single creditor.

Depending on the interest rate you can get at the time, a consolidation loan can also have much lower interest rates. It won’t work in every situation but it might work for you.

Give it time

The final step to rebuilding your credit in 2021 is to give it time. Credit scores don’t go up overnight. It takes weeks and months to rebuild your credit.

Even if you’re not planning a car loan or any further borrowing, planning in advance can save a lot of time and money in the long run!

 

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