A bad credit score can cause your reputation and finances a lot of trouble. So, how do you fix it? There are several things that you can do to start improving your credit score. It will not have positive effects right away, but it will show results within 3 to 6 months depending on how bad your rating is. You can implement all of these 6 simple things to start making a change to your credit rating, no matter the reason for it being bad in the first place.
1. Evaluate Your Credit Reports
Before you can start fixing things, you need to have an idea of what exactly you need to repair. Request your credit reports from all relevant credit unions and study it closely. Check that your personal details are correct. Check for any discrepancies. Look for payments or withdrawals that shouldn’t be there or that you know wasn’t you. Check for issues that may be valid but have been sorted out.
If you find any issues on your credit report, you can contact the unions and have them fix it. If these issues badly influenced your credit then you should definitely see improvement in your score soon.
2. Pay Your Bills on Time
The first step to getting your credit back on track is to make sure that you pat all your bills and on time. This is one of the most important things that lenders and banks look at when they need to give someone approval for credit. If you pay your bills on time and keep doing so for several months, you will soon see a change in your rating and finances.
Not only is paying your bills good for your credit rating, but it is also a good habit to have for the future. Once your credit is repaired, you should keep this up and ensure that your rating doesn’t drop again.
3. Get Rid of Existing Debt
Most people with a bad credit score has debt they struggle to get rid of. Many situations in life may bring people to the point where they need a loan and have no other option. However, to start repairing your credit score, you need to get rid of this debt. Less or no debt will definitely improve your credit score.
So, if you have debt, start paying it off in lump sums if you can. It is often a good idea to start paying off more of the highest interest loans as they tend to get bigger fast. Try to pay more than the minimum every month so you can bring the total debt down faster.
4. Apply for a Structured Credit Card
Different types of credit can be a good thing when you want to apply to buy a house or a car. However, when you’re in a bad credit position, this may not be an option for you. One option that you can try is to ask your bank for a structured credit card. The bank is secure on their loan because you need to have a set amount of money as collateral for that card. This means that you cannot spend what isn’t there.
A structured credit card that you pay diligently will be a good step in the direction of repairing your credit. So, find out which banks offer these cards to people with bad credit and make sure that you manage it well.
5. Don’t Apply for Another Loan
If you need to apply for another loan in order to improve your credit score, you may need to consider debt counselling. Another loan is not the answer and it will do your credit score more harm than good. So, avoid applying for another loan at all costs. You need to find another way to pay your bills and pay off existing debt.
Debt counselling may be the answer to your problems if you really find yourself in a bad credit situation without any way out. Debt counselling will consolidate your debt and make it easier for you to pay off what you owe. Once your credit is repaired and your debt paid off, you can consider another loan. However, you should take great care with decisions like that.
6. Improve Your Spending Behavior
The main issue for many people with bad credit is that they don’t manage their finances well enough. There are so many bad financial and spending habits that can ruin you within a matter of minutes. So, check your habits and improve them. Things that you should look out for include reckless or impulse spending, bad investments, too much eating out, unnecessary purchases, gambling, bad planning, and living outside your means.
All of these things can cause problems very quickly. You should pay close attention to your spending habits and make sure that you cut out any problem areas. The best way to plan and manage your finances is to have a realistic budget. A budget will tell you how much money you have every month, how much money needs to go towards paying bills and taking care of other responsibilities, and it will tell you where your problem areas are.
If you take these 6 steps and apply them properly to your life and your financial situation, you will be taking the first positive steps towards credit repair. Bad credit doesn’t have to be the end of the world. It can be fixed. It will not be easy and you feel frustrated often until the results start showing. When you see that things are looking better, you will be relieved that you stuck with it.