By now youâ€™ve likely learned that bad credit doesnâ€™t have to be permanent. If you start working to repair it, you can raise your score and–after enough time passes–erase the negativity from your record altogether. Where most of you are running into trouble in figuring out how to fix your credit. Here are 6 ways to rebuild your credit and your financial health.
- Put the Cards Away
If you or your creditors have closed the account you can shred the card and get rid of it. If, however, the account is still open and revolving, donâ€™t close the account. It is better to start paying it down than closing it out completely. Take the card out of your wallet and put it somewhere that is hard, but not impossible, to find it. You want to be able to access these cards in an emergency but not so easily you can give into temptation when shopping (online or off). The more available credit you have, the better your score looks.
- Work with Bad Credit Creditors
Be careful here. There are lots of companies on the internet that insist they are the second coming for people whose credit is bad. More often than not, these companies just want to make a quick buck off of you (or many, in the case of payday lenders). The best way to find a company that works with people whose credit is bad is to work directly with the merchants from whom you are trying to make a purchase. Many of these store owners and companies work with third party financiers like Crest Financial who specialize in helping people with bad credit get the financing they need. These companies donâ€™t often check credit reports, but they will report your payment history to the credit bureaus. Paying these bills on time will definitely raise your score.
- Secured Credit
If you donâ€™t need to make a large purchase right now but still need a way to build a positive credit history to help offset the negativity on your report, a secured credit card is a good way to go. A secured one is a card for which you put down a specific amount of money as collateral. However much you put down will be your credit limit. Then, you use the card like you would any other. The best way to use this card to improve your score is to use it for small purchases once or twice a month and then pay off the card before interest can be charged to the balance.
The most common reason given for missing payments and credit delinquency is that the payments they have to make–even the minimums–are too high. If this is the case, talk with the creditors about reducing your interest rate. Most credit companies and lenders would rather lower your interest rate than lose your business altogether. The lower your rates, the easier those bills will be to pay and the more of your balance each payment will reduce.
- Professional Help
If your credit report is truly a mess, itâ€™s worthwhile to seek out professional help. Be wary of anybody who promises to fix your credit report for you. Instead, work with people who will help you fix your finances. Credit counselors and debt consolidators are great agents to have on your side. They can negotiate your bills down and consolidate them into one bill that you pay each month. Look for non-profit organizations and organizations endorsed by official channels like the government or your bank.
- Therapy and Education
Many people who work hard to repair their credit, sadly, just go on to wreck it again. This is because they donâ€™t learn what is at the root of their overspending or how to make and stick to a budget. Figuring out why you buy what you buy is important to making sure that you donâ€™t repeat past mistakes. And taking a class or two on personal finance and budgeting (you can find these for free online through portals like Khan Academy and EdX) can help you better understand how budgeting and managing spending is done.
Each of these six steps is helpful for repairing and rebuilding a spotty credit report. Which steps you choose are up to you. What matters is that you start working sooner or later to get yourself back on track.