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How long does it take to fix bad credit?

Posted on 5 December 2021

Written by Gillian Goldblatt

We all aspire to have a perfect credit score. After all, nobody wants negative reflections of their credit history or missed payments for financial institutions to see when you need new credit or a loan. Often, however, this is the reality of the situation. Credit scores are determined by a number of different variables, including credit utilization rate, how often you make payments, whether your payments are made in full, and the length of your credit history. All these factors feed into a rating system that summarizes your overall credit score. So, what if your credit score has been damaged by poor credit behaviour? How long does it take to fix bad credit? In this article, we explain what could determine a poor credit score, and how you can fix bad credit.

How is bad credit determined?

Your credit report is determined by various different factors which will each stay on your report for a specified amount of time. For instance, should you file bankruptcy, this will likely reflect on your credit report for up to seven years. In Ontario, for instance, credit reporting agencies have to follow the Consumer Reporting Act. This act lays out the guidelines for how long an item may be attributed to your credit report. This means that after a certain period of time, the different items from your credit report will be removed should certain conditions be met. According to TransUnion, one of Canada’s major credit bureaus, the average credit score in Canada is 650. Despite the average, around a fifth of Canadians have a credit score that is below 600, which is of course much less than the average. If your credit score is below 600, and want to borrow credit you will likely incur higher interest rates as you are considered to be higher risk. Having this score does not need to last forever – by understanding what has gone wrong, you can begin improving your credit score.re.

How long does bad credit remain on your credit report?

Ultimately, this depends on the kind of impact that is reflected on your credit report. First of all, you may want to review your credit report in detail for any errors that you may be able to dispute with the credit bureaus. Note that you will need evidence to support the thinking that your credit report is incorrect. Disputes for any inaccuracies can take between three to six months to resolve. Although certain activities like filing a debt relief solution like bankruptcy or a consumer proposal will last for years, you can act sooner. If you begin to repay your debt, it will start to reflect on your credit report within a month. Credit reports are updated each month and will update your credit score accordingly. Creditors and financial institutions will also be able to see your behaviour in making an effort to repay debts should you need credit or financial products in the future.

How can you fix bad credit?

You are best off first of all downloading a copy of your credit report from both Equifax and TransUnion to understand exactly how it works. From this point, you will know what you need to do to change it. You will also be more aware of errors that could get recorded on your credit report, and know to dispute them if needed. The next step to fixing bad credit is then to make sure you do not leave bad credit items unpaid. Bad credit certainly will not disappear of its own accord. Note that items like collection calls for debts will reduce your overall credit score fairly dramatically. You should therefore make a payment as soon as you can. The length of time unpaid debts will remain on your credit report is also dependent on your province of residence. For instance, in Ontario, defaults will remain on your credit report for two years, while in Manitoba they could remain for seven years. It is worth understanding how you will be affected by these provincial legislations. There are a number of other activities you can take to try and fix bad credit:

  • Avoid multiple hard credit inquiries within a short period of time, e.g. for credit cards, student loans, etc as they can impact your credit score negatively
  • Only apply for credit as and when you absolutely need to
  • Dispute any false marks on your credit report quickly
  • Fix any problems including poor balances and defaulted items as and when you can
  • Seek help from a Licensed Insolvency Trustee to discover your quickest pathway to a fresh financial start

How long does it take to fix bad credit?

In many instances, it can take seven years to completely fix bad credit. This is because by default, if an item on your credit report is seven years old, it will automatically be removed from your credit report. It is possible to fix bad credit much sooner, of course. This is provided you act on any of the problems you see on your credit report. By working to repay your debts as quickly as you can, you will also avoid accruing additional interest and causing further damage to your credit report. Ultimately, the time it takes to fix bad credit is as long as you take to act. If you are able to resolve many of the issues, you may be able to fix your credit report sooner than you know.

If you need support in fixing bad credit and beginning a fresh financial future, book a free consultation with Spergel. Our experienced Licensed Insolvency Trustees have been helping Canadians gain debt relief for over thirty years. We offer personalized advice depending on your unique financial circumstances, no matter how bad you believe your situation to be. You owe it to yourself.

Gillian Goldblatt

Gillian Goldblatt is a Chartered Professional Accountant and Insolvency and Restructuring Professional. She is also an award-winning LIT (Licensed Insolvency Trustee) and Vice-Chair of the Ontario Association of Insolvency & Restructuring Practitioners Board. As Spergel's resident expert on debt consolidation and financial literacy, you can find Gillian being interviewed regularly on popular Canadian news programs when she's not at the office helping individuals and businesses get back on track.

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