If you have bad credit, you’ll know how difficult that can make certain aspects of your life. Although your general day to day life may not be affected (which is why many people have no idea that they even have bad credit to start with), when it comes to needing some extra money or wanting to buy something important, including a property, that poor credit score can really make a negative impact on what you are actually able to do. In some cases it can prevent you from making a purchase at all, and even if you can, it might mean that the interest rate you end up paying is much higher than you thought it would be.
This is why fixing your bad credit score as quickly as possible is essential. That way, with good credit, you can borrow money (sensibly) at a fair rate and be able to enjoy life that little bit more. So here are some ways to fix your bad credit; see which ones might work for you.
Check Your Credit File
If you keep getting turned down for loans, credit cards, mortgages, and other lending options, it could be because your credit is poor. If you continue to apply for borrowing without checking out your credit file first, you could be making things worse. If you’re worried about your credit score, go online and search for a company that will give you your information. Some of them will cost a few dollars, but that can be worth paying if it means you get all of your credit information in one place.
Once you have your report take a good look and work out what the problem is. You’ll see that you have been given a number and that is your credit score. Ideally, you will also get to see how good or bad that is. If you’re not sure, search online to find out what the average score is for someone of your age in your area.
Dispute The Errors
The number may be the most important element of a credit report, but there is more to it, and you should read the whole thing to make sure that it’s accurate. For example, it will show you any addresses or people you are linked to (such as a spouse), and if their credit is bad that can pull yours down too. If you think that there is a mistake and you shouldn’t be linked to this person or that address, you need to dispute it straight away – it could indeed be a mistake.
The same is true if there is a negative mark against you for a loan that was paid off many years ago. This should be removed and its presence might be affecting your credit in an adverse way.
It may sound like a strange thing to suggest, but borrowing money can actually help you to fix your credit score. The more credit you have the better, as long as you don’t use it all up to its limit. If one card is maxed out, having another with nothing on it can improve your score, for example. Of course, with poor credit it can be difficult to obtain this additional borrowing, but there are credit cards and loans specifically for people without good credit (you can discover more here). You will be able to repair your credit quickly and fix the problem.
When it comes to a loan, although this won’t necessarily repair the damage, it can show that you are a sensible, responsible borrower (and at the very least, a loan for poor credit means you can have the money for consolidation or other important purchases anyway).
Pay Off More Than The Minimum
Paying the minimum each month is good in one way as it means you aren’t missing any payments, and this looks good on your credit score. However, it also means that it will take much longer to pay it all off and cost you a lot more in interest charges by the end of it all. It’s far better to pay off larger chunks of the debt, especially as this means you will be free of it sooner (although, do make sure there are no early repayment charges that will cost you a lot of money).
It’s easy to say you should pay more than the minimum, but it’s not always easy to do. However, if you can spend a month living on a really tight budget and not buying anything that was necessary, that leftover money can be immediately used to pay off some additional debt. Do this for three, six, or even 12 months, and those debts will disappear quickly. Once you have paid everything off, your credit will be better and you will have more money each month anyway because you won’t be servicing your debt anymore.
Look At The Interest
If you have a number of different debts it’s likely that you’ll have a number of different interest rates to deal with as well. When you are working out which cards or loans to pay back first, focus on the one with the highest interest rate as you will save more money that way. Then, when those are gone, you should turn your attention to the newest debt. You will be left with old, low (or at least lower) interest debts which do a lot less harm to your credit rating. Of course, paying them off is also a good idea, but not quite such an urgent one.
Keep Accounts Open
It might feel satisfying to close your accounts once they are completely paid off, but try to refrain if you can. When you close an account, you are lowering the amount of credit available to you. Having a lot of credit extended to you that you don’t use is the best way of obtaining a higher credit score, so by keeping the accounts open, you are helping yourselves in an easy way. Simply cut up the card and dispose of it, so that you’re not tempted to use any of the credit that you’ve just worked hard to pay off.