Poor credit is practically an epidemic, thanks to the “keeping up with the Joneses” mentality that pervades our culture. Pair that with the fact that there is no mandatory instruction in basic finance in school and you can easily see how so many people get in over their heads where credit is concerned. The good news is that you don’t have to let a few bad decisions saddle you with bad credit for the rest of your life. There are ways to get back in the black and rebuild your credit, no matter how low your rating has dropped. Here are a few simple strategies to consider.
Find out what you’re working with. The first step to rebuilding your credit is finding out what your score is and what infractions you need to clear up in order to being the rebuilding process. This means ordering your free credit score online. Once you can see black marks, you can start to address the worst of your credit issues in order to repair your credit. You might even find some instances of wrongful reporting (if, for example, you’ve paid off a debt and it’s still showing up as being in collections). Keep in mind that some old debt is good, such as regular mortgage payments, so you might not want to remove it. But black marks and credit card debt should definitely be addressed as quickly as possible.
Stop spending. Sounds pretty obvious, right? And yet, there are plenty of people who view credit as money in the bank and continue to max out their cards as soon as they make a payment. Credit is a loan – it’s not your money! So if you’re having a problem with spending on credit, cut up your cards. From there you can continue to pay them down without adding to your balance every month.
Ask forgiveness. You might be surprised by what you can get just by asking. If you’re in over your head with debt and you can’t see any way to pay it down, ask creditors for forgiveness. You might not get much traction with, say, utility companies. But when it comes to medical bills and credit card companies, you’re very likely to secure a reduction in what you owe, as well as the opportunity to set up a feasible payment plan for remaining debt. It can’t hurt to ask.
Reboot your credit. If you’ve messed up your credit so badly that your credit cards have all been cancelled and you can’t get approved for new ones, there is still hope. You can opt for a secured credit card, or one for which collateral is required. You’ll send in a check for the credit limit (start small, say $500). If you make purchases and pay them off monthly, you’ll get your check back at the end of the secured period (a year, perhaps), with interest. And your credit score will have improved during that time thanks to your faithful repayment of credited funds. From there you should have an easier time getting credit cards, loans, and other options to build your credit further.
Call in the pros. A free report from Credit Sesame is the first step to fixing your credit woes. But if you want to rebuild credit, you may need to enlist the help of a specialist. Credit repair professionals can help you to come up with a workable plan to pay down existing debt, get your finances in order, and improve your credit score. If you can’t figure it out on your own, don’t hesitate to hire help.