Let’s say you’ve been working hard to rebuild your credit after being discharged from bankruptcy. That’s great! It’s what you should be doing. Just one NSF (non-sufficient funds) cheque or automated withdrawal or a late/missed payment could be disastrous to your credit rating. Your non-bankrupt friends and family might be able to get away with it, but not you! Of course, no NSF transaction or late/missed payment goes unpunished. But when you’re recovering from bankruptcy, it’s far worse to have one of those on your credit report than for other Canadian consumers.
As long as there’s a bankruptcy reporting on your credit profile, consider yourself “on notice.” You’re automatically disqualified from many lenders and credit issuers. Of those who still remain, they’re going to be extra cautious about extending ANY sort of credit to you – even to extremes. I recall speaking with an after-bankruptcy mortgage broker who told me that even one missed payment, late payment or NSF transaction reported to my credit reports would automatically disqualify me. Sounds a bit harsh, doesn’t it? Well, it should. It may be a bit extreme, especially considering your non-bankrupt friends could probably get away with the occasional late payment. But not when you’re an ex-bankrupt!
So you need to do whatever it takes to preserve your newly re-established good credit. Hopefully by now you have a secured Visa and a secured MasterCard. Maybe even an installment loan. And your cell phone bill may be automatically reporting to your credit reports too. That’s great! Make sure you pay those on time. In some cases, you must pay the entire amount, such as your cell phone bill or a car loan. If you pay less than the monthly payment (a “partial” payment), it’s a strike against you. You’ll be behind in payments. And you don’t want that reporting to your credit report.
With revolving credit, such as your secured Visa or MasterCard, you could get away with the “minimum” payment. Let’s say you’re carrying a balance of $800. Your minimum payment might be $30 that month. Of course, you need to pay at least the minimum payment. Ideally, pay more. Or better yet, pay it off! Save money on interest charges and improve your debt ratio score (the amount of credit you have used versus the total available in your credit limit – obviously the less you use, the better). Sometimes things happen. If you can’t pay it off in full, at least pay more than the minimum payment.
And whatever you, make sure it’s on time! To make sure it’s on time, pay your bills as soon as you get them. You might get them by email or printed on paper. Make it habit to pay bills as soon as they come in. If you can’t pay them as soon as they come in, make sure you note the due date and pay the bills several days before. Payments made through online banking are usually the quickest, but can still take anywhere from two to five business days to reach the company you’re paying. So don’t pay the day it’s due or the day before!
Better yet, set up automatic payments so that the money comes out of your bank account or your secured credit card. Just be sure there’s enough money or you might be facing an NSF charge AND a late or missed payment! Automatic payments are usually set up for the day they payment is due, so if you miss that date, you’re in trouble.
OK, let’s say you really screwed up an have a cash shortfall. Or maybe there was an unexpected emergency and you don’t have a savings account or an emergency fund. You know the consequences of a late payment, so do whatever it takes to make that payment on time! Of course, make sure it’s legal!
Let’s say you’re short money this month. Here are some suggestions for ways to get that money:
- Take some money from your savings or emergency fund
- Sell something you don’t use. Price it aggressively for a quick sale. Use Kijiji, Craigslist, eBay, etc
- Have a garage sale
- Sell your car. If you have two vehicles, and one is paid off, sell that one. You’ll save money on insurance, registration, gas, etc. And you’ll have some money to pay your bills.
- Move to a cheaper place. If you rent your accommodations, consider moving to a cheaper one. Maybe even closer to your workplace to save even more money. But be aware that many corporations that own apartments and townhouses will not rent to anyone with a bankruptcy on their credit report, so don’t apply if there’s going to be a credit check.
- Change your insurance. Shop around if you live in a province that does not have government run insurance (like ICBC in British Columbia), or if you can live with less coverage and a higher deductible, do it.
- See if you are allowed to delay or skip a payment on an installment loan or insurance payment. This will usually come with some consequences, such as extra charges, but if there’s nothing else you can do, it’s better than a late payment!
- Do without something. Bring your lunch to work and make your own coffee, if you’re a coffee drinker. Skipping the coffee shop and restaurants can save a huge amount of money. All of those little $2, $5 and $10 purchases add up!
- Skip purchases of non-essentials. Don’t buy new clothes, shoes, handbags, cosmetic, etc if you already have enough to wear and you have a cash shortfall. Ladies, that was geared mostly at you! Men, skip the magazines, car accessories, more new toys for your kids, electronics, games, movies, etc. The same goes for entertainment. Skip going out to the cinema or theatre, clubbing, shopping and drop the premium cable TV package. Go to a cheaper one, or go all the way and cancel it all together. See if you can drop down to a lower Internet and cell phone package.
- Cancel a phone line. Cell phone packages just keep getting and better. You might be able to cancel your home phone landline and just use a cell phone, as many Canadians are doing now.
- Get rid of your bad habits. It may be hard, but try giving up drinking and smoking. It will be better for your own personal heath as well as your financial health.
- Avoid temptation. If you can’t resist a good bargain, stay away from the malls, online shopping websites and TV channels or anywhere else you could be tempted to spend money. It’s like sending an alcoholic into a bar and expecting him or her not to drink anything. You know it’s not going to happen, so don’t tempt fate.
- Borrow money from a friend or family member but only as a last resort! Many friendships and relationships have been ruined over small loans.
- DO NOT get a cash advance off your credit card if at all possible. The interest rate is usually very high, and can apply to your whole balance, and it could apply from the day you withdraw the money. Plus, it will increase your debt ratio. Paying debt by incurring another debt is not a good idea!
- DO NOT get a “Pay Day Loan” – not only are the rates outrageous, once you start using their services, it’s hard to break free – it can become a vicious cycle.
- Get another job! Go drive a cab, deliver pizzas, work as a waiter or waitress (the pay may not be good, but the tips can add up and it’s instant cash money – no waiting 2 or 3 weeks for the first paycheque). Deliver newspapers, get a job in retail, at a call centre, babysit, rake leaves, snowblow driveways, cut lawns, if you have a talent like graphic design, post your services online on Kijiji, Craiglist, elance, guru.com or a similar website, collect cans or whatever you can do! Yes, it may be beneath you to do a job like this, but I’ve done almost all of them at one time or another in my adult life when I had to make ends meet. And remember, it doesn’t have to be permanent.
- If you’re self-employed, seek out more clients, or higher paying projects. If that doesn’t work, swallow your pride and see above for some temporary job ideas
- Pick up some extra shifts at work, if you have a job that enables you to do this.
- Find a better paying job. It may not be immediate, but a higher income may help in the coming months, as long as you don’t increase spending on non-essential items! Remember, if an entry level compact car will suffice, don’t buy or lease a BMW convertible just because you can afford it now.
- Live below your means. I hate living below my means. I’d rather increase my means. This extensive list of ideas will help you do both. Do whatever you can do or feel comfortable with. Everyone’s situation is different.
Some of those ideas are more drastic while others are much easier to implement. Do what it takes to preserve your good credit rating. Once you start looking at these areas, you may be surprised at where you were wasting money, or how you were cutting yourself out of extra income.
Some of these changes may be a little bit hard to adjust to. It may be a one-month only situation due to unexpected expenses. But if you’re routinely cutting it close or have a shortfall, it’s time to re-evaluate things and do something different.
Remember to keep current with your payments no matter what, so long as it’s legal!