Mike's Spruce Grove Mortgage Blog

How do I re-establish my credit rating quickly? (Canada) Wednesday, May 1, 2019

How do I re-establish my credit rating quickly? (Canada)

A) If you are simply trying to start a credit rating you will need about one year. 

B) If you are looking to re-establish after problems with your credit score (items that were incorrectly reported), this might be done with a few well placed phone calls and letters.

C) If you are looking to re-establish after a judgement against you...that requires the account to be paid in full and a reasonable explanation to the creditor. 

D) A cosigner/guarantor might help you to qualify and then you can re-establish while you own the property.

E) If you are just discharged from bankruptcy, you can either choose to put a large down payment down 35% of the purchase price and some high risk mortgage lender will fund the 65% that is remaining (interest rates are higher that what you see online). 

F) If you are discharged from bankruptcy and you want to qualify for a regular discount rate mortgage, you need to talk with your mortgage broker and work through a strategy.

  Generally you will hear about re-establishing your credit through one or two of the following methods...

1. You need to know what is on your credit bureau.  The best way to do this is to check out your credit bureau report through Equifax Canada or their competitor TransUnion.  Search "Equifax Canada" or "TransUnion" and follow the search inquiry for your own personal information.  You should make this an annual practice, to protect yourself.

It costs a few dollars, but you need to do this for three main reasons. 1) Identity theft protection,  2) monitoring your credit and 3) If you check your own credit, it does not reduce your Beacon score (your credit score).

Find out who is reporting and what they are reporting.  Also find out who is inquiring. If you see a name on your inquiries list that you did not authorize to view your credit, report that company to Equifax Canada or TransUnion. There are very strict guidelines protecting your privacy and that unauthorized inquirer will need to answer to the credit inquiry monitors.

You also want to look at any public records that show up.  These are bankruptcies, judgements, foreclosures, past due support payments, collectors, income tax arrears, etc.  Make sure that all the facts are correct and try and find all documentation regarding the reported items.  Keep them in a file, so that you can explain what transpired for each of the reports.  CMHC will sometimes ask for a letter from you, explaining why an account went bad in the first place.

2. Re-establishing credit.  I am not taking about buying a pre-paid credit card at your local store. Pre-paid credit cards are not attached to your name and do not help to establish credit one bit.

The fastest way to get a $2000 limit on a bank credit card, that reports to the credit bureau, is to put a $2000 security deposit on a "Secured Credit Card", in your name (or both your names, if you are married).  They are offered everywhere, so call me at 780-940-0604 or email me at mike@realmortgagesolutions.ca if you are not sure where to look.  I can even send you an application for a Home Trust secured Visa. 

Your future mortgage lender and CMHC will be looking for two established creditors and they both require a history of at least one year.  If you already have a car loan, that will count as one and  your secured Visa/Mastercard will be the other.  But If you don't need to borrow to get a car then try and stay out of debt, by getting a second credit card. Something like a Capital One Visa that gives you a $500 limit.  Once again, I am not asking you to keep a balance.  Just use it to buy your gas for your car or an online purchase and then immediately pay it off.  Never make a purchase on your credit card that you do not immediately pay off. If you can't afford it you are just taking the first step on that slippery slope, once again.

If you want to re-establish your credit through a car loan consider three things 1) credit departments at dealerships do something called "shotgunning' your application to all of their lending partners.  Everybody and their dog suddenly pulls a bureau that you authorized at the dealership. This drops your Beacon score and makes it difficult to qualify anywhere else.  2) Your new car payment will affect the price of the home you are allowed to buy.  If your income is $100,000 a year and you have a car payment that is $450/month, you will probably be okay for a $350,000 purchase.  If your income is $60,000 per year and your payments are $1000 for your car, that takes 20% of your monthly budget.  and 3) If you are simply trying to establish credit and you really can make your existing car last a few more years, at least try and get past your house purchase qualifying and then see if there is enough left in the budget for that Mercedes.


posted by MIke Toporowsky at 12:55 pm

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