Making calculated decisions when it comes to your finances is necessary especially if you are trying to build your credit reputation. It’s easy to build a good credit score or even to upgrade your status from good to excellent in credit rating but it takes a huge amount of discipline to fix and rebuild your credit rating.
Many people find themselves in a huge financial mess upon incurring massive debt. It’s quite easy to ruin your financial reputation. Frequently missing repayments for your loan can damage your credit reputation and lower your credit score.
Here’s a great video we found on practical ways to improve your credit score:
Your Credit Score – What Category Are You In?
A FICO score of 700 and above is a good credit score. You have an average credit score if you fall within the range of 600 to 750. An excellent credit rating would mean you consistently have a credit score of 800 and above. Now, if your credit score drops or is below 600 then that would translate to a bad credit rating. Here is an interesting tool created by FICO to estimate your credit score.
What a Bad Credit Score Does To You
A bad credit is bad news. It affects your credit reputation and your ability to get approved fast or acquire loans. While different lenders would have different metrics for approving loans, they would generally rely on your FICO score when they decide on your loan status. While some financial institutions or lenders could grant you loans even with bad credit, you might not enjoy the perks of low interest rates and settle for incredulously high interest rates due to a negative credit standing. You don’t get the best seats with a negative credit rating after all.
Not only that, you might have difficulty keeping or finding your next job as employers would usually check on your credit standing as part of the hiring process. You find yourself out of work, unable to pay rent. Bankruptcy and divorce can negatively affect your credit score so make sure to check on your credit report right away.
Actionable Steps To Rebuild Credit
Having a bad credit may adversely damage your financial reputation. It’s a sad reality but it’s true that people would usually treat you based on your financial health. Furthermore, you might be labeled as an irresponsible person who can’t keep up with repayment schedules and lack financial discipline. You can either sulk and do the blame game or do something to change the situation. Here are a few actionable steps that you can do to improve and rebuild your credit:
Check your credit report
You need to start by looking at your current financial standing. You can do this easily by checking on your credit report. This will allow you to get organized and plan which items should be prioritized when you repay your debt. You can possibly get a free report once a year from each credit bureau. Check the accuracy of your credit report. Report and dispute errors as soon as possibly as this can pull down your credit score. You can also report fraudulent accounts and request for a credit freeze to protect your credit standing.
Get a secured credit card
Most people with bad credit are not eligible for a regular credit card. The best way to repair and rebuild your credit score is by acquiring a secured credit card which is linked to a funded bank account. On-time payments would help rebuild your credit and payment history which will reflect on your credit reputation. This will help increase your credit score. Look for a credit card that has no application fee, low annual fees, and can be converted to an unsecured credit card after a year of establishing regular and on-time payments.
Pay on time
At this point, you cannot afford to miss deadlines or make late payments. You are closely and constantly on the radar so every financial decision you make will reflect on your credit score. Pay your bills and existing credit lines on time as late payments would reflect and stay on your credit report for seven years. A slight misstep or a missed payment may severely hurt your chance to repair your credit score.
Get a co-maker or co-signer for a loan
Getting approved for new loans or a credit card would be an unlikely option at this point so a co-signor would help increase your chances especially if you have one with a good or excellent credit score. Only do this if you are certain that you can pay your loans on time and not default because you are putting another person’s credit reputation at risk. Consider the risk of falling into the debt trap, and be sure to avoid it.
Work out a win-win arrangement with creditors
It’s very important to keep your accounts up-to-date. Contact your creditors and express your intention to pay your obligations. Plan and create a schedule and payment amount that will be beneficial to both parties. You can get in touch with a credit counselor to help you create a plan that will help you be debt-free in no time.
Final Thoughts On Improving and Rebuilding Your Credit
You can’t fix your credit score overnight. Nothing can be repaired instantly without leaving a few loose ends. The impatience or trying to speed up things might have actually led you to the financial rut that you are in right now. Admit that you need to remodel your attitude with money and everything else will fall into place. Having clarity at where you are in terms of your credit standing and where you aim to be will help you move out of the financial despair that you are currently in.
Finally, go down to the roots of all your piled up debt and inability to repay on time. To clear your debt, you need to change the way you look at money. You need to keep a record and monitor your spending habits. You can rebuild your credit score slowly and securely. It might take years to repair your financial reputation but you will get there.
