Credit building for Canadians
Your credit score tells lenders about your credit history and how risky it is to lend funds to you. If you have a low credit score, this means there is a greater likelihood of you failing to repay a debt on time than someone with a higher score. There are two credit bureaus in Canada, and these are Equifax and TransUnion. Your scores with these two bureaus can differ depending on factors like the information that’s been reported to them.
What’s in my credit file?
Your credit file includes information like your personal data, credit history, inquiries that have been made on you and public records like bankruptcies, debt settlements and so on. Before anyone lends any money to you, they will normally check your credit file and score.
Can I still borrow with a poor credit history?
If you have a poor credit history, you may find it harder to access the funds that you need to cover the cost of things like cars, furniture, houses and so on. Your credit may be checked by lenders, landlords, insurance companies, utility providers and even your employer. Thankfully, there are several things you can try if you do have a poor credit score and need to improve it so you can start borrowing for the things that you need. You may still be able to obtain some credit if you have a bad credit history, but you may need to pay more to access credit and may need to agree to stricter terms than someone with a better score.
How can I build my credit score?
One way to build your credit score up is to get a secured credit card. These cards are secured with cash deposits which are normally the same as the credit limit. You will get this deposit back when you close your account. Many people use secured cards to build up their scores before applying for regular credit cards.
Credit building programmes
Credit building programmes like KOHO’s can also be incredibly helpful. With a credit building programme, you’ll normally pay a monthly fee to gain access to funds that will be sent to your bank account. Each of the repayments will be reported to the credit bureaus. Just make sure there is enough cash in your account to cover these repayments each month. Once you have a proven ability to make regular repayments on time, it’s more likely that other lenders will take you on.
Credit rehab and builder loans
Credit rehab loans from credit unions and community banks can also help improve your credit score, as can guarantor loans. You’re more likely to be accepted for financial products if you have a guarantor to support your application. Credit builder loans have also proved popular amongst those seeking to build their credit. With a credit builder loan, you make monthly repayments and withdraw your money at the end of the term. You should only ever take out credit if you’re confident that you will be able to make the repayments on time, or your score could continue to drop until it’s even harder to obtain financial assistance.
What else can I do to boost my score?
Other ways to improve your credit score include paying your bills on time, not going over your overall credit limit by 30% and keeping old credit accounts open even if your debts are settled. Closing a credit account can harm your credit score. Avoid making too many credit applications around the same time and be vigilant for signs of fraud when checking your current credit score.
Credit building with KOHO
If you are interested in using a credit building programme to improve your credit score, KOHO may be able to help. All you need to do to get started is to verify your KOHO account and make sure there’s at least $7 in your bank account. It costs $7 a month to subscribe to KOHO’s Credit Building programme. The programme lasts for six months and is designed to help you build credit “without lifting a finger”.
How does KOHO Credit Building work?
When you first register for the feature, you’ll be given a no-fee, no-interest line of credit that’s been designed to improve your credit score. The line of credit is kept separate from your available balance. A portion of the funds will be deducted each month, and this will be reported to the credit bureaus. You won’t be able to spend this money, as it’s designed to enhance your credit rating. All you need to do is make sure you have $7 in your account every month so the subscription fee can be covered. This means you will only need to pay $42 over the 6 months, but you can continue after this point if you wish to carry on building credit.
Tracking your progress
Once you have registered for Credit Building, you can take a look at your current credit score. The score should be updated each month, and you’ll be able to see how much it has jumped by in the app. You don’t need to have a hard credit check carried out to make use of this facility. KOHO will simply run a soft check, and this won’t have any impact on your credit score. The company reports to the TransUnion credit bureau.
Can my score still fall whilst I’m in the programme?
It’s worth noting that your credit score can still go down even if you are using this feature. However, this will normally be related to something unrelated to KOHO, such as a missed bill or credit card payment. Your credit score may fall if you have defaulted on a loan or if you’ve consumed a substantial amount of credit in a short time period. Your score may also go down if you miss a KOHO Credit Building payment, so it really is important to ensure you always keep at least $7 in your account balance. KOHO Credit Building could be the solution you need to gain access to vital assistance in the future.