Rebuilding Credit Canada

Published: 2021-09-13 21:30:09
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Rebuilding credit Canada
After fully completing a consumer proposal or receiving a discharge from bankruptcy, it is important to start immediately rebuilding credit Canada. The purpose of this Brandon’s Blog is to provide you with our foolproof 3 step plan to rebuild credit.
Rebuilding credit Canada
Step 1
Create good habits of discipline and self control Before you start rebuilding your credit score after bankruptcy or consumer proposal, you must create good habits of discipline and self-control. A lack of these habits might have been partly responsible for your current situation, so working on changing bad habits, and creating new ones will lay the groundwork for a successful financial future. Research has shown that on average, it takes more than 2 months before a new behavior becomes automatic – 66 days in fact. So, while at the beginning, having to be disciplined and exert self-control over spending money might seem like hard work, stick with it for a couple of months, and very soon it will just become part of your daily routine. Learn discipline through budgeting Aside from rebuilding your credit, learning how to create a budget and then sticking to it is the most important step of rebuilding credit after bankruptcy or consumer proposal. You’ll be looking closely at your money anyway, so use this time to get a real grasp on your entire financial situation. Understand where your money comes from, and, more importantly, where you spend every penny. You’re going to need to make friends with spreadsheets and familiarize yourself with all your bank and bill statements. Create categories of all your expenses (e.g. rent, electrical bills, car insurance, groceries etc.) Using your past bank statements, look at what you are currently spending in each category. You’ll probably be surprised at how much money you spend in some! Set limits for how much you will spend per month in each category. This will likely mean making some sacri????ces to ensure your budget balances (the total amount being spent does not exceed the total amount coming in). However, be realistic – don’t tell yourself you’re going to stop doing things you enjoy altogether. Instead, cut down on how often you do them. E.g. budget for a meal out once a month rather than a couple of times a week. Get in the habit of planning and recording every single expense, not matter how small. Keep receipts and go over where your money has gone every month. Plan rewards for different milestones along the way. It’s important to have things to look forward to and motivate you along the way. Budgeting takes discipline and sacrifice but keep focused on the goal. You’re doing this to ensure you don’t fall back into the same bad habits as before. You are going to have to change some things – and what better time than while you’re starting over? You’re already doing the work, now the trick is to make this disciplined. Practice self-control in your spending (and saving!) The golden rule of spending? Learn to live within your means – it sounds simple, but it can very hard to do. However, those who live within their means do not get into trouble with debt, and that’s what you’re working towards for the future!
You’ve created a budget, you know exactly what you can spend in each category, now you need to execute on that. While in bankruptcy or a consumer proposal, any excess money you earn is going to go to your debtors. That may make it seem impossible to save. That doesn’t mean, though, that saving money shouldn’t be in your plan. As soon as you are discharged from bankruptcy or your consumer proposal, start saving money every month. Work a specific amount (we recommend 10%) into your budget so that you learn to live within that new budget. Setting up automatic payments and transfers into your savings account on payday will ensure your money goes where it needs to before you even have time to think about spending it. So where should this money go? First, establish an emergency fund so that you can avoid facing bankruptcy again in the future. A good emergency fund should cover at least 3 months of living expenses. Once your emergency fund is built, continue to save by contributing to your RRSP or TFSA as much as you possibly can while still meeting your month-to-month expenses. As you can see, the bulk of bankruptcy recovery is forming good habits of discipline and self-control. Once you have made these core habits in your life, you’ll find the next stage of recovering from bankruptcy, building your credit, relatively easy!
Rebuilding credit Canada
Step 2
Work to rebuild your credit after bankruptcy or consumer proposal Many people believe that you can only start rebuilding credit once you have completed a consumer proposal (3 years!) or a bankruptcy (7!). However, you can actually start rebuilding credit right away. There’s an old saying that goes “The best time to plant a tree was 20 years ago. The second-best time is now.” We recommend that you don’t wait 20 years, or even 3. Here’s what you need to know to start building credit today. Here are 3 of the easiest ways to rebuild credit after bankruptcy: Secured Credit Card – A secured credit card looks and functions just like a regular credit card, with your lender reporting to the credit bureaus on a regular basis. The only difference is that you put up a security deposit in the form of cash which acts as collateral to secure the credit up front. This protects the lender from the possibility of you defaulting on what you owe because your security fund will be used to cover any outstanding amounts.
A Secured Line of Credit – Much like a secured credit card, a secured line of credit is revolving credit that is secured by money you offer up in the beginning. As you use your line of credit and you pay what you owe on time, you will establish a picture of good money habits which will both boost your credit score. These lines of credit are available through most banks. Create Your Own Credit Building Programs – Credit building programs are one of the most effective methods at rebuilding credit after bankruptcy or consumer proposal. Programs like borrowing a small amount to invest in your RRSP. Then repay the loan in full before the next RRSP year. This is beneficial in 3 ways: You don’t have to come up with the funds, you are investing in your future and by repaying the loan, you are showing you can handle credit properly which improves your credit score.
Rebuilding credit Canada
Step 3
Maintain your good habits for the rest of your life Rebuilding your credit is not a one-time event. Think of rebuilding your credit after bankruptcy like losing weight. At the beginning, dragging yourself to the gym and making kale smoothies is hard work. However, as you start to see the weight drop, it becomes easier and easier. What happens when you reach your goal weight? Do you stop going to the gym and start eating pizza for breakfast? No! You just carry on as you are now – because it’s become a habit, and if you slip back into old habits, you’re quickly going to see all of your hard work come undone. Your goal is to rebuild your credit and create good habits for life. Regularly checking your full credit report from both credit bureaus will help you see how your good habits are paying off. Kinda like weighing yourself to make sure you’re still where you want to be. If you start seeing negative results, take stock of what’s happening in your life that could be causing it and make changes to quickly get back on track. Ultimately, whether you’re declaring bankruptcy or entering into a consumer proposal, it will be emotionally difficult. There is a light at the end of the tunnel though.
Many people don’t realize that you can start building credit while going through both a bankruptcy or consumer proposal so that at the time of discharge, you’re already a few steps ahead. Follow these steps and you’ll find that rebuilding your credit after bankruptcy isn’t that difficult. Rebuilding credit Canada: Do you know anyone who needs to get back on the road to financial recovery? If you have too much debt and need someone to talk to about vs bankruptcy , call the Ira Smith Team. We will listen to your issues and provide you with our thoughts and recommendations for free. That’s right; a free initial consultation. So why not? All you have to lose is your stress. We will advise you whether or not we think you are a candidate for either a consumer proposal or bankruptcy. If we feel you can solve your financial problems without an insolvency process, we will tell you straight. The Ira Smith Team understands the stress you are under and the pain it is causing you and your loved ones. We can eliminate your pain. I guarantee that you will start feeling better right away after our free initial consultation. Taking action after that will put you on the right path.

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