How to rebuild your credit score

Posted on 24 January 2021

Written by Jeff Adiken

One of the questions we are commonly asked by those who have filed bankruptcy or a consumer proposal is ‘how to rebuild your credit – when and what do you need to do?’ Knowing how to rebuild your credit is particularly important if you have gone through insolvency. You credit report is key to borrowing money, as it acts as an indicator of how well you manage your money. The important thing to note is that no matter how bad your credit rating, it is always possible to rebuild with persistence and good habits. Here are our top tips on how to rebuild your credit.

Pull your credit reports

After you’ve completed your consumer proposal or obtained your discharge from your bankruptcy, we suggest you pull your credit reports for free from Equifax and Transunion. Check that both of your reports are error-free. If there are errors, write to the credit bureaus to make the changes. It is a good idea to check your credit report each year to see how you are performing with your different creditors. Analyzing your credit report is also a good way to understand what you are doing well, and what needs improvement. Put simply, your credit score will be ‘graded’ from poor to excellent, depending on the score you are given from 300 to 900. What is even more important is that your credit report will show three factors that show what you need to do to improve your credit score and how.

Pay off any late payments

By reviewing your credit report, you will see if you have missed any payments, if any are moving to collections agencies, or if there is an error. If you spot any missed or late payments, or any errors, it is for you to fix. If there are any outstanding payments, work to fix them as quickly as possible. In order to rebuild your credit, you need to consistently stay on top of these payments in order to gain positive credit. This is applicable to any loan payments and bills too, as these are reported to the credit bureaus. If you are struggling to keep on top of your payments and debt, the best thing to speak to a Licensed Insolvency Trustee. They will help you on your way to a fresh financial future, whether or not you have filed bankruptcy or a consumer proposal.

Get a secured credit card

With poor credit, it can be difficult to convince lenders and creditors that you are trustworthy. Therefore, applying for a credit card can be an extra challenge. The best step for attempting to rebuild your credit is to take out a secured credit card. Secured credit cards require you to put down an initial security deposit that is equal to or potentially more than your credit card limit. It is a safe way for lenders to give you money that they know they will receive back. Used in this way and repaying at least the minimum balance on time is the best example of how to rebuild your credit. Gaining multiple credit cards, however, can have a negative impact so it is best to stick with one and have a limit no greater than the deposit. At Spergel, our Licensed Insolvency Trustees will support you each step of the way in helping to improve your credit report.

Watch your credit utilization ratio

A credit utilization ratio is the proportion of credit you use from the total credit available to you. In order to rebuild your credit, it is best to not exceed more than 30 percent. Anything beyond this ratio, and your credit score may begin to drop. This rule generally applies to each financial credit product that you have. Should you continually exceed this ratio, creditors and lenders may not want to risk lending you any money. If, however, you are able to consistently pay off your credit card bills on time, it will show that you can handle your credit with responsibility. If you are struggling with credit card debt, the team at Spergel can offer advice and credit counselling to help rebuild your credit report.

Limit your credit inquiries

Although it can be all too tempting to gain credit immediately after bankruptcy or a consumer proposal, it is important to be patient and ensure the process is slow and steady. This is because each and every time you request new credit, your credit report will be pulled. Creditors are able to see each time your credit report is pulled, and may be alarmed if this is a regular occurrence. It is best, therefore, to be patient with your credit inquiries and to be selective. Minimizing the banks you request credit products from is also a good idea in order to build trust.

Speak to a Licensed Insolvency Trustee

Rebuilding your credit can be a difficult task and it takes time and patience. It involves being strict with budgets and repayments, as well as administration on any old accounts. It can often be overwhelming and difficult to know where to start. If you need support, it is best to speak to an experienced Licensed Insolvency Trustee. As they are the only professionals able to administer a bankruptcy or a consumer proposal, they can offer the most appropriate advice for rebuilding your credit. They can help you to build a debt repayment plan, negotiate on your behalf with creditors, and offer support on budgeting and gaining a secured credit card.

If you want to learn more on how to rebuild your credit, book a free consultation with Spergel. Our Licensed Insolvency Trustees have been helping Canadians to rebuild their credit scores after bankruptcy or consumer proposals for over thirty years. You will be assigned your very own trustee to walk you through the process. Reach out today – you owe it to yourself.


Jeff Adiken

Jeff Adiken is a Certified General Accountant and Chartered Insolvency and Restructuring Professional with over 18 years’ experience as an LIT (Licensed Insolvency Trustee). He also manages all of Spergel's personal insolvency offices and is our resident expert on credit card debt and debt-free living. When his 'manager hat' comes off at the end of the day, Jeff is happiest spending quality time with his family at home.

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