Got bad credit in Canada? It’s not the end of the world! Everyone makes mistakes, and nearly 20% of Canadians have “sub-par” credit scores of 620 or lower. Whether you’ve suffered from bankruptcy, overdue credit card bills, or missed loan payments, your credit score isn’t set in stone – you can always rebuild.
Hopefully, you’ve already taken care of your outstanding credit issues with a credit counselling service, and you’re ready to start rebuilding – and avoid getting into more debt.
While this may seem intimidating – and difficult – it can be done. You have the power to take control of your financial life, rebuild your own credit, and avoid debt. And we’ve put together a list of 5 tips that can help you create a budget, manage your money effectively, and stay out of debt. Read on to learn more.
1. Make A Budget – And Stick To It. Seriously.
The first step to rebuilding your credit and staying out of debt is to manage your money effectively. If you have bad credit, there’s a good chance that you’ve made a few mistakes managing your money in the past – and if you want to rebuild your credit score, you’re going to have to avoid those mistakes.
Begin by tracking your fixed expenses. Fixed expenses are any expense that you’re expected to repay on a regular basis, such as credit card settlements, rent, groceries, student loan payments, car payments, mortgages, utility payments, and insurance. Sit down and make a list of every single monthly payment you have to make.
After that, you can make a list of variable expenses – things like clothing, subscription entertainment services, spending on alcohol and activities, and other non-essential expenses.
After you do so, you’ll have a much better idea about how much money you can actually spend per month – and you can avoid going over this limit, and falling into debt.
Mint is a very popular online budgeting tool, and they even have a version specifically designed for Canadians. Using this tool, you can track your expenses from various financial accounts, and get great insights into your overall financial health.
2. Start Tracking Your Spending – Every Single Penny
Did you buy a coffee this morning from Tim Horton’s? Keep the receipt, and make sure you enter it into your budget. Did you buy a tank of gas? Make sure that you put it into your budgeting software, and account for it.
To build good financial habits, you need to track your spending. From the big stuff to the small stuff, you should keep records of every transaction you make. By doing so, you can begin to understand where you spend the most money – and how you can cut down on your monthly expenses in order to repay debts, or make other required monthly payments.
After you’ve kept records of your spending for a month or so, you may be shocked at how much money you spend frivolously. Getting a coffee every day before work could cost you nearly $100 a month! After you understand this, you could take steps to reduce costs – like brewing your own coffee – and you can save quite a bit of money.
3. Try To Use Cash – Not Cards
Credit cards – and even debit cards – make you spend more. When you buy an item with a credit card or a debit card, it doesn’t feel real. You hand over the plastic and you get the item – it’s just that easy. This can lead to poor spending habits, and poor credit card use is the primary cause of bad credit in Canada.
To avoid this, start keeping your disposable income in the form of cash. Whatever you can spend per month on yourself – as determined by your budget – should be kept in an envelope. When it runs out, that’s it. You don’t have any more money to spend on frivolous things this month.
Doing this lets you get a better idea of how much money you really spend, and can encourage better spending habits.
4. If You Still Have A Credit Card, Pay It Off Every Month
If you have bad credit, you can still often get a credit card – even if you have had credit issues in the past. And, in fact, paying down a credit card regularly can actually help you improve your credit score over time – it proves that you have adopted healthy spending habits.
However, that last part is key. You must change the way you use credit cards, and pay the balance on your credit card each month. If you don’t, you risk falling back into your old ways – overloading yourself with credit card debt, and then struggling to make monthly minimum payments.
If you don’t think you can trust yourself with a credit card, you can apply for a secured credit card instead. These cards allow individuals to make a deposit of cash for a certain credit limit – say, $500.
You deposit $500, and then you will have a $500 credit limit. If you default on your debt, the bank will simply take your deposit and close down your account. This is a great way to encourage healthy spending habits, and ensure that you don’t run into further credit card trouble.
5. Cut Down On Your Variable Monthly Expenses
If you made a comprehensive budget, you’ll probably have a large list of variable monthly expenses. You should examine this list closely, and see where you can make changes to save more money, and repay your debts more quickly.
Do you need both Netflix and Hulu Plus? Do you have to buy new clothes this month, or can you shop at the thrift store? Could you spend less on restaurants, and more on home-cooked meals?
Be honest with yourself, and see what you can live without. This can go a long way towards reducing your debt burden, and rebuilding your credit.
Follow These Tips – And Begin Your Journey Towards Financial Responsibility!
Debt and bad credit are tough to deal with – but with these simple tips, a bit of knowledge, and a dedication to fiscal responsibility, getting out of debt is not impossible.
Still, bad credit can make some everyday tasks quite a bit more difficult. You may have difficulty getting a car loan, for example – which can make things very tough if you need reliable transportation for work.
Well, you’re in luck if you’re a Canadian with bad credit! Ride Time, located in Winnipeg, specializes in second chances – our network of lenders can give you a great rate on a fantastic used car, regardless of your credit score
If you make more than $1,500/month before deductions, can provide a valid Canadian driver’s licence, and have been employed for more than 3 months, Ride Time can work with you to get you a great used car at a reasonable rate.
So don’t let bad credit hold you back. Come to Ride Time today, or visit us online – we can deliver our cars anywhere in Canada!