A Fresh Start - Credit After BankruptcyBeing able to obtain credit after bankruptcy is an extremely important part of the recovery process.  After declaring bankruptcy in Canada, all of your unsecured debts are eliminated. This is also documented on your credit report and remains there for a minimum of six years. This doesn’t mean that you can’t get credit again for six years. It just means that you will have a hard time getting credit. There are a number of things you can do to establish and rebuild your credit after a bankruptcy to be able to qualify for traditional credit again.

Qualifying for credit after bankruptcy

Before extending credit to a borrower after a bankruptcy, lenders want to see established credit for at least two years after being discharged from bankruptcy. They also want to see different kinds of credit being obtained and used perfectly in different amounts. Credit cards are called revolving credit and loans are called installment credit. Revolving credit means that you constantly have what ever your credit limit is available to you but with an installment loan, you can’t access what has already been paid off on the loan.

At a minimum, lenders offering mortgages want to see at least one revolving credit line and one installment credit line with a minimum of credit $1,500 each. They are also must have perfect repayment histories.

Secured credit card

A secured credit card works to satisfy the revolving credit line that lenders are looking for. You have to save up $500-$1,000 to be used as a security deposit or collateral. This security deposit then becomes your credit limit. You are then issued a regular credit card to use. If you don’t make the monthly payment on time, the credit card issuer will take the security deposit and pay off your bill with it and then cancel your card. As you continue to save, you will want to increase your credit limit to at least $1,500 by increasing your security deposit.  The problem with a secured credit card is that if the cause of your bankrutpcy stemmed from uncontrolled spending on credit cards, having another credit card might be too much of a temptation for some people.

Savings loan

To satisfy the installment credit line that lenders want to see, the CreditSpark Savings Loan is the best option. With a Savings Loan, instead of giving the money loaned directly to you, it is used to purchase a Guaranteed Investment Certificate (GIC) for you with a large Canadian financial institution. This GIC acts as collateral for the loan. You make the monthly payments on the loan and then when the loan is paid off, you get the GIC and the interest that the GIC has earned. It works to establish your credit but also helps you save money for the future. You can use these savings for a down payment on a house or car or just as a rainy day fund.

If you obtain both a Secured Credit Card and a Savings Loan and make full and timely payments on both of these over a period of two years after your bankruptcy discharge, you will have built and established your credit and will have started to save for a down payment.  You should then be able to qualify for traditional financing like a mortgage.

When to apply

CreditSpark is one of the few lenders in Canada that is able to lend prior to you being discharged from bankruptcy.  This means that you should apply for a  CreditSpark Savings Loan as soon after you have declared bankruptcy as possible.  This will be able to show future lenders a longer repayment history of re-established credit.   For a secured credit card, you will have to wait until the day you are discharged from bankruptcy to apply.  Let CreditSpark help give you a fresh start so you are able to get credit after bankruptcy. Apply Today!

Credit ScoreYour credit score is one of the most important numbers in your life and you probably don’t know too much about it. Do you know how it is calculated? Do you know what impacts a credit score?  It turns out that not many people do.

What is a credit score?

A credit score is a numerical representation of the amount of risk that the lender takes in extending you credit compared to other consumers. Each credit bureau and even many lenders have their own calculations and methods that they use to calculate your credit score. The Fair Isaac Corporation developed the model that calculates your credit score.  Each credit bureau then uses this model as the framework for their own score. Equifax calls theirs the Beacon Score and TransUnion calls theirs the FICO Risk Score.   These  credit scores range from 300 to 900 with an average near 700.
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How Do I Get Credit?If you have never had credit before, you are probably wondering “how do I get credit”?  For someone that is just starting out like a recent grad or a new immigrant to Canada, getting credit can be an intimidating idea.

How Do I Get Credit? – Chicken or the Egg

The age old dilemma of the chicken or the egg comes to mind.  Which one came first, the chicken or the egg?  The exact same issue comes up with getting credit.  In order to get a loan or to start building your credit, generally you need to have credit first.  This makes sense from a lender’s perspective because before they lend out money, they want to ensure that they know about your financial track record with loans before to know they will get their money back.  But what happens if you have no credit and have never had a loan before?  Then what do you do?  Luckily, there are some solutions to be able to get your credit established to be able to qualify for credit.
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Unclaimed BalancesHave you ever misplaced your car keys and forgot where you put them?  How about finding free money (aka a five dollar bill) in your winter coat from last year?  Believe it or not, people do forget about where they put their money or which bank they use.  Each year millions of dollars go unclaimed at banks and credit unions.  When money goes unclaimed, the financial institution transfers it to the Bank of Canada.  The Bank of Canada is required to hold balances that are less than $1,000 for a period of 30 years.  If that isn’t enough, they hold unclaimed balances that are over $1,000 for 100 years!  As of the beginning of 2012, there were a total of 1.3 million unclaimed balances worth more than $465 million dollars.

What is an unclaimed balance?

An unclaimed balance can be either a deposit or an investment issued by a financial institution.  This could be a savings account, a chequing account, a GIC, or term deposit.   It can also include money orders, certified cheques, and traveller’s cheques.  Items like stocks, bonds or other investments are not included and are not held by the Bank of Canada.
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Good Credit HeartEver since the first internet dating website appeared, new dating websites have popped up. You can date married people on Ashley Madison, aesthetically average people on The Ugly Bug Ball, or even be set up by your grown children on My Lovely Parent. But now, the new trend in dating is asking your date about their credit score!  Now, websites like DateMyCreditScore.com and CreditScoreDating.com are becoming increasingly popular.

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Top Rated Finance and Credit ArticlesAs this year comes to a close I thought I would take stock of some of the best personal finance and credit related articles that the team at CreditSpark has enjoyed reading and writing over the past year.  I hope you enjoy these posts from many top notch bloggers and writers as much as we have.

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Cost of Christmas LightsSeeing the many houses in our neighbourhood all decorated for Christmas made me think about how much people are spending over the holidays to have their house lit up.  It inspired me to calculate the cost of Christmas lights.  The answer actually surprised me.

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Christmas LightsGrowing up I always wanted to decorate the house with Christmas lights to look like a gingerbread house.

Within the last year, my husband and I moved from a 600 square foot apartment with a balcony to a two story house with a yard.  While we did have a 7 foot Christmas tree that took up a huge part of our living room in the apartment, we were not supposed to have Christmas lights on our balcony, and we really did not see the point of having outdoor Christmas lights 10 stories up in the big city, so we all our decorations were indoors.
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What is my Net WorthDo you know what your net worth is? Not everyone does. Your net worth is the result of adding up all of your assets (things you own) and then subtracting your liabilities (amounts you owe).  The calculations are very simple for calculating your net worth but it may take some time to dig through all your statements to ensure you have the values correct.

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