How to Fix Bad Credit in Canada By Debra PangestuIf you are wondering\u00a0how to fix your credit score in Canada\u00a0or resolve some\u00a0bad credit\u00a0issues on your credit report, we\u2019ll show you how you can fix four common problems. Depending on your situation and how much damage you\u2019ve done to your credit score, the answers vary, but the bottom line here is that we\u2019ll share with you information for free that\u00a0some credit repair companies\u00a0try to charge a lot of money for. We begin with lighter credit problem issues that are very common and move into bigger challenges. Jump to a section in this series: How do Missed Credit Card Payments Affect My Credit Score? How Does Credit Card Debt Affect my Credit Score? How do Unpaid Collections Affect my Credit Score? What if I Have a lot of Late Payments on My Credit Report How do Missed Credit Card Payments Affect my Credit Score? A lot of people get really concerned because their credit report shows they\u2019ve missed one or two\u00a0credit card payments. While this may impact your credit score a bit, in the big picture it usually isn\u2019t a big deal. Mistakes happen from time to time, and sometimes things get missed or are even reported incorrectly on credit reports.Having a Good Credit History Will Lighten the Impact of Late Payments As long as you have a\u00a0good credit history\u00a0that spans many years, one or two late payments will be like a small scratch on your car door: it\u2019s unsightly to look at, but in the grand scheme of things, the scratch doesn\u2019t change much. But if you drive around with a lot of scratches and dents on your car, people may get the impression that you are careless and may begin to ask questions. The same is true with your credit report. The more late payments that show up, the better the chances are that your lender is going to ask you what happened, and the more likely it is that your credit score will be impacted.Request a Free Credit Report Every Year to Keep Your Credit in Check If you diligently pay your bills on time, but are wondering if something slipped through the cracks, you can request a\u00a0free credit report\u00a0once every year\u00a0to give your credit a checkup. This is also a good idea anyway to make sure that your credit report is accurate.How Does Credit Card Debt Affect my Credit Score? If you have had credit cards for a number of years and you always pay your bills on time, yet you have a low credit score, it may be because of the amount of\u00a0credit card debt\u00a0you are carrying. If any of your credit card balances are routinely over 75% of your credit limit, this is a red flag to the credit scoring system. Carrying such a high balance on your credit card will significantly lower your credit score because statistically it\u2019s a sign that you may be under increasing financial pressure and you may be quickly running out of financial resources to bail yourself out of a jam. All this means that you\u2019re likely a higher risk, and banks are in the business of managing and reducing their risk, not increasing it.Keeping Your Credit Card Balance at 50% or Lower Is Best The way to fix this situation is to keep your balances below 75% of your\u00a0credit card balance. Staying below 50% of your limits will help your score even more, and of course the best thing to work towards is completely paying off all your credit cards every month and trying not to carry a balance at all. If you are struggling with your debt and need some expert help, give us a call and make an appointment to speak with one of our\u00a0Credit and Debt Counsellors. They\u2019re a wealth of knowledge and can provide you with some helpful advice and guidance.How do Unpaid Collections Affect my Credit Score? A lot of peoples\u2019 credit scores take a hit for\u00a0unpaid collections\u00a0reporting in the public records section of their credit reports. These kinds of collection items include unpaid parking tickets, speeding tickets, traffic fines, cell phone bills, and utility bills. The good news is that as soon as you pay off debts like this, you can ask the creditor to remove their collection notice from your credit report. And, many of them will do just that. If one or two collection items were the cause of your low credit score, once these collections are removed it should\u00a0fix your credit score, which should instantly rebound. When it comes to fixing credit scores, this is actually the only way it can be instantly fixed. Everything else takes time.Get a Clean Credit Report by Paying Off Debts, Talking to Creditors and Waiting\u00a0 And just so you know, nothing else can be removed from your credit report. Everything else has to fall off over time. So if you have another debt you\u2019d really like to see disappear, you\u2019ll need to pay it off completely, ask the creditor to close it, and then don\u2019t touch it again. After seven years of no activity, the debt or credit facility will fall off your\u00a0credit report. If it doesn\u2019t, you can contact the\u00a0credit reporting agency\u00a0and request that they remove it.What if I Have a lot of Late Payments on My Credit Report If you have a lot of missed or\u00a0late credit card payments, there really aren\u2019t any quick ways for you to\u00a0fix your credit score. The only perfect way to repair this type of damage is to build a good credit history. This is done by demonstrating over the long-term that you can pay your bills on time. Do this and your credit score will improve as the records of the late payments fall off your credit report.How can I Fix My Credit Score Faster? The short answer? Use credit wisely and pay off debts. While you\u2019re working at paying off your debts and improving your credit payment history, there are a couple of things you can do to\u00a0fix your credit score faster: \u00a0 Have at least one credit product available to you and use it responsibly. See if a Debt Management Program is a good option for your situation. Pay Off Debts Through a Debt Management Program (DMP) You can also fix your credit through a\u00a0Debt Management Program\u00a0(DMP). We don\u2019t recommend using a DMP for this purpose, but if you can no longer afford to pay your credit card debts, then going on a program with one monthly payment and little or no interest could make sense. If you work hard at paying off your debt aggressively while on a\u00a0debt management program, you can be debt free within two or three years. The record of all debts put on the program will then be erased from your\u00a0credit report\u00a02 years after you finish the program. This is much faster than waiting the normal seven years to get a clean slate. It\u2019s also much faster, more satisfying, and results in higher average credit scores for consumers than\u00a0filing a consumer proposal\u00a0or\u00a0declaring bankruptcy. Learn more about Debt Management Programs or explore other debt relief options that can help you\u00a0achieve your financial goals sooner.What is the Best Way to Use Credit? \tPay attention to your balance and always pay it off When you\u2019re working at getting out of debt and dealing with financial problems, it can be tempting to go cold turkey, cut up your credit cards, and live without credit. While this can be a great way to discipline yourself to accomplish your goals, it won\u2019t help your credit rebound quickly. To improve your credit, you need to demonstrate to the computerized credit scoring system that you have an available credit limit and are\u00a0using credit wisely. \tHave One Active Credit Card, Use It and Pay it Off a Couple Times a Year Make sure that you have at least\u00a0one active credit card\u00a0(this could also be an overdraft or line of credit). If it\u2019s a new credit card, make sure you use it at least once, pay it off, and then rarely use it. You can use the card once or twice a year to keep it active,\u00a0pay off the balance, and then just let it sit. Having credit available to you and not using it shows you\u2019re using credit responsibility. Just make sure you have a decent credit limit. Showing you can use a $100 credit limit responsibly doesn\u2019t say much. Having a $1,000 or $2,000 limit and not using it, says something. Using this approach combined with either paying all your other debts on time or not having any other credit at all, can begin to\u00a0fix your credit quickly\u00a0and may give you a decent credit score within a year or two. \tTry to Get a Secured Credit Card to Help You Build Your Credit If you don\u2019t qualify for a small unsecured credit card, then your bank or credit union may be able to give you a cash\u00a0secured credit card\u00a0where you let them hold the equivalent of your credit limit in cash as collateral for the card in case you don\u2019t pay the balance. After a year or two you may qualify for an unsecured card, and then they can give you your money back. Using secured cards wisely is a great way to help you\u00a0build your credit\u00a0and show that you are now responsible.Contact us for More Information About How to Fix Your Credit Score For more in-depth information about how to\u00a0fix your credit score\u00a0or how to fix bad credit, you can\u00a0contact us\u00a0by calling us at 1-888-527-8999 or chat with us online. Our friendly staff can set you up with an appointment to speak with one of our accredited, non-profit\u00a0credit counsellors. We are here to help you find solutions to your financial problems, pay off your debt, and get your finances back on track. All of our appointments are free, non-judgmental, and completely confidential.