How to Repair Your Credit

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Repairing your credit is easy. It can be time-consuming, but it’s worth it.

If you are struggling to qualify for a loan, buy a home, or even rent an apartment, chances are that your credit needs repairing. Most people don’t even realize they have bad credit until it is too late. Yes, I am talking about the time a buyer gets declined when trying to finance the purchase of a car, after applying for a credit card or other loans.

What is my credit score?

I have been there too. Back in 2006, I received a call from a collection agency asking me for a payment on my student loan.  Yep, I had missed a payment. I had just entered the job market and even though the money was good, I was short of funds.

The collection agent asked me for an immediate payment to which I said sorry, it will have to be next month because I was short of funds. To my surprise, the collection agent pushed harder and threatened to report me to the credit bureau.

I then responded with a set of words that ended up chasing me for years. I said, “I could not care less about the credit bureau”

What a mistake! Without much thought, life went on and I continued paying my student loan.

About 3 years after that, I applied for a line of credit and was declined, precisely because of that little line on my credit report that read “I could not care less about the credit bureau”.

From that point on, I spent years learning everything about credit, and more specifically about how to fix and improve my credit score.  Here is what I learned: 8 simple steps that can help you fix and improve your credit today.

Credit Repair Guide

Step 1: Check Your Credit Report

Step 2: Dispute Errors and Negative Remarks

Step 3: Evaluate Your Financial Health

Step 4: Know Your Credit Utilization & Request a limit increase

Step 5: Improve Your Payment History

Step 6: Pay Down Outstanding Balances

Step 7: Use Your Credit Card More Often

Step 8: Keep Your Old Accounts Open

Step 9: Monitor Your Progress

Step 1: Check Your Credit Report

Reviewing your credit report is like reviewing the results of an annual health check-up.  Your debt payment habits, how much money you owe, and the risk you represent to creditors get summarized into a neat little number called your credit score.

Lenders use this credit score to judge who you are as a consumer, and as a client.

Your credit report may contain the following information:

  • Accounts you have opened such as credit cards, lines of credit, retail store cards, mortgages, and other loans.
  • Registered liens like a car lien that allows the lender to repossess in case of failure to pay.
  • Remarks, including consumer statements, and fraud alerts.
  • Inquiries from lenders – how many times lenders have accessed your credit report in the last three years.

For each account listed, the report will show how much you owe, if you make your payments on time, missed payments, and more. Here is an example of what’s you’d see for each account.

John Smith

123 Any Street
Toronto, ON M1T 6S5
Beacon score: 715


Name:  John Smith – Marital Status (Married)
File opened: 05/01/10

Current address: 123 Any Street, Toronto, ON M1T 6S5
Date reported: 5/19
Previous address: 456 Bloor Street, Toronto, ON M5S 1T6
Date reported: 12/15

Previous address: 789 Jane Street, Toronto, ON M5S 1T6
Date reported: 5/10
Current Employment: Accountant, Prep ‘N List it Inc.
Date employed: 6/15

Previous Employed: Analyst, Answers Learn Inc.
Date employed: 1/10

Birthdate:  1990/XX/10<
SIN #: 568-XXX-039<
Tel #:  416-555-5555
Driver’s license: A12345678910


Date Requestor’s Telephone Number
7/20/11 ABC Mortgage (111) 555-5555
8/16/12 XYZ Retail Store (111) 555-5555
10/05/18 Furniture Store (111) 555-5555


ABC Mortgage (111) 555-5555 last reported 01/2019 – M1 – balance $534,999. The account was opened on 7/20/11. Highest credit limit is $650,000 – $2,500 monthly payment.

The account has been 2 payment periods past due 0 times

The account has been 3 payment periods past due 0 times

The account has been 4 or more payment periods past due 0 times

XYZ Retail Store (111) 555-5555 last reported 02/2019 – R1 – balance $2,815. The account was opened on 9/19/16. The highest credit limit is $5,000.

The account has been 2 payment periods past due 2 times

The account has been 3 payment periods past due 1 time

The account has been 4 or more payment periods past due 0 times


A collection was reported on 8/12 by ABC collection agency for $1,560. Balance outstanding: $280. Collection Status: Unknown. Reference: XYC Bank. Date of last payment: 7/12

A judgment was filed in 12/13. Plaintiff and/or case # ACME 423547522. The status is reported as Satisfied. Date satisfied: 2/14. Name of Lawyer: A Young LLP

A voluntary bankruptcy was filed on 3/13 in Ontario. Case number and/or Trustee: 1234567 Neil & Partners LLP. Liabilities: $50,000. Assets: $15,000. Item classification: Individual. The information is reported as Discharged.


What do the letters and numbers mean on the rating of your credit?

Letter Meaning

I. Installment Credit (Example: a car loan)
O. Open status credit (Example: a line of credit)
R. Revolving credit (Example: a credit card)
M. Mortgage loan

Number Meaning

1. Paid as agreed within 30 days of the billing cycle
2. Late payment 31 – 59 days
3. Late payment 60 – 89 days
4. Late payment 90 – 119 days
5. Late payment over 120 days
6. Not used
7. Making payments on debt consolidation or consumer proposal
8. Repossession
9. Bad debt / sent to collection / bankruptcy

The best rating is 1. Any number higher than that hurts your credit score.

For example: If you have a car loan and you pay on time, it will be reported as “R1”. On the other hand, if you have a credit card and you miss a payment by 35 days, it will be reported as Q2.

The most common negative items that affect your credit score are:

  • Collections
  • Late payments
  • Bankruptcy
  • Repossessions by a lender
  • Judgments

Step 2: Dispute error and negative remarks

When reviewing your credit report, did you find errors with existing accounts, or accounts that are not yours?

Many people share similar names or last names; it is possible your credit report could show items that don’t belong. Or the accounts may be correct, but you do not recognize why there is a late payment comment.

If you find errors on your credit report, start by reaching out to the financial institution that reported the item. For example, if you finished paying a loan, but the lender still shows the amount owed, you should reach out to the lender and request them to remove the amount owed from your credit file.

Another case could be if you see a balance on a credit card you never used, which could suggest identity theft.

If the lender or institution cannot or would not resolve the issue for you, the next step is to request the respective credit bureau to remove the error, but keep all documentation of every attempt you make to correct the errors.

The fact is removing errors or negative items from your credit report is going to make a big positive impact on your credit score.

Ask politely

Creditors can instruct the credit bureau to remove negative items from your credit file. For example, about 2 years ago I bought an investment property and immediately rented it out. Since I did not live there I missed a gas bill and paid it late.

Two weeks after my payment, I received a refund because the gas company had sold the debt to a collection agency, and the bad debt was already showing on my credit report. I called both the gas company and the collection company to explain and they both agreed to remove the negative remarks showing on my credit report.  That was easy, wasn’t it?


Once you file a dispute, the lender or credit institution has 30 days to respond to you with either evidence that proves the information on your credit report is accurate, or with a notification stating they have removed the item from your file at the credit bureau.

Here is a secret

Collection agencies and small credit firms will likely ignore your request when you contact them to dispute a negative remark on your credit file. They are required to respond to you in 30 days, but many small firms do not.

What does this mean?

If you do not receive a confirmation from the creditor in 30 days, they are required to remove the negative remark from your credit file. I am not recommending that you do this if the negative remark is accurate, but many credit repair companies use this as a strategy to get negative remarks removed from their credit reports.

Step 3: Evaluate your financial health

It’s important to evaluate your financial health to ensure you are not overspending. How is this relevant to your credit report?

The best way to build a consistent, sustainable credit history is by doing the following:

  1. Spend less than what you earn
  2. Pay your bills on time
  3. Never get more debt than what you can handle

Now, to be able to achieve these objectives you need to work on a budget.

Start by summarizing how much money you make; then subtract all your expenses. If you don’t end up with at least 10% on money left at the end of each month, including debt payments, you need to cut back on your spending. Some of the easy areas you can target to cut back expenses are clothing, eating out, and entertainment.

To consistently improve your credit score, you must pay your bills on time. It’s as simple as that. If you are late three months in a row but pay on time the following month, that won’t do it. Your credit score will only improve after you have paid your bills on time for at least 4 months.

As time goes by, the negative aspects of your credit report will start to fade away and be replaced with an excellent payment history that will surely bring up your credit score.

Step 4: Know your credit utilization

The amount of money you owe in comparison to your credit limit is your credit utilization.  This means if you have a credit card limit of $3,000 and you owe $600, your credit utilization is 20% ($600/$3,000).

Credit utilization accounts for 30% of your entire credit score, so the closer you are to your credit limit, the lower your credit score will be.


One quick and easy way to improve your credit utilization is by requesting a credit limit increase.  Please note, I am not saying you should apply for new credit; applying for new credit can harm your credit score if you already have several accounts.

If you have been keeping up with paying your bills on time, chances are that when you request a credit limit increase, the lender will approve the increase without having to check your credit report again. The higher credit limit will immediately improve your credit utilization ratio.

Let me explain!

If you owe $600 of a credit card limit of $1,000, then owe 60% of the credit limit, which is a high ratio that would negatively impact your credit score.  However, if you ask for a credit limit increase from $1,000 to say $3,000, all of a sudden you go from owing 60% to owing just 20% ($600/$3,000 = 20%).

A credit limit increase on an existing account would have an immediate positive effect on your credit score, but remember, the goal is not to get further in debt.

Step 5: Improve your payment history

As you can see on the above credit score chart, payment history is the most important factor, as it accounts for 35% of your credit score; that’s more than a whole one-third of what makes your credit score.

Late and missed payments will reduce your credit score fast, and guess what? Negative information will remain on your credit report for 7 years. Yikes! If you have late payments, your credit report will show how late those payments were.

The bad news:  Unless you pay your bills on time consistently, you won’t be able to get very far in improving your credit score.

The good news:  A single late payment will not ruin your credit even though the information will remain on your credit report for seven years. If you get back on track, your credit score can rebound right back.

The best way to positively influence your credit score is by paying your bills on time. Make it a habit!

Step 6: Pay down outstanding balances

I know, you must be thinking the reason why you want a higher credit score is because you want to borrow money.

Let me explain this to you with a personal story.

I have been a real estate investor for over 12 years now. When I bought my first property, I was still carrying a balance on my student loan. Even though the outstanding balance was under $5,000 and I was paying about $500 per month, which means I would finish paying the student loan in 10 months.

However, I was getting ready to buy a house, so I took part of the funds I had for the down payment and fully paid the $5,000 student loan. This means even though my down payment had decreased by $5,000, I could now qualify for a mortgage because my total debt was lower.

Yes, paying down a balance when you need more credit may be hard, but it should be part of your strategy so that you can get a better credit score, which means you qualify for lower interest rates.

Step 7: Use your credit card more often

I use my credit card to pay for everything; to pay for parking, at the grocery store, at the restaurant. The points I get accumulate fast, which I redeem in cash. If you are going to buy something anyway why not use your credit card and then pay the credit card company?

The increased activity and the payments you will make will go into your account history which means the credit card company will show you their love by rewarding you with even better rates, a higher credit limit, and even give you a break when you missed a payment by a day or two.

When the lender reports this history to the credit bureau you will be further rewarded with a higher credit score. Now, as a valued customer, you will have access to the best financial products and the best rates. It all starts with a plan, a budget, and consistent positive habits. If I could do it, You can too!

Step 8: Keep old accounts open

The older your active account is, the more it helps your credit score. If you are trying to build a strong credit score, it’s a good idea to keep old accounts open.

Do not close old accounts. In fact, closing an account with a ten-year history will result in a reduction in your credit score. Even if you don’t plan on using a credit card account you opened ten years ago, you are better off closing a newer account vs. closing older accounts.

Step 9: Monitor your progress

To improve your credit score and keep it there, you will need to change the underlying elements that influence your credit report with good spending habits, and consistent, responsible payment history.

If you are planning to buy a house or a car, check your credit report at least six months before your planned purchase so you have the time to fix potential issues that could cause a problem in obtaining the needed credit.

The bottom line

Your key takeaways are: check your credit report at least once per year. If your credit score needs improving, start by having errors removed.

Once you have taken care of the past, focus on the future. To achieve consistent good credit, work on a budget, pay your bills on time, and don’t allow your credit utilization to be above 30%. As your credit improves monitor your progress and repeat.

If you decide to use a credit repair company to help you repair your credit, please be aware of credit repair companies that promise a quick and easy solution. It’s important to know the following:

  • Credit repair companies cannot fix your credit quickly. It would take the same time that it takes you to fix your credit yourself using the 9 easy steps I explained in this article.
  • Credit repair companies cannot guarantee to completely fix your debt problems.
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