Bad credit can turn your daily routine into disarray. A late payment here, a missed payment there, and before you know it, you are already below your average credit score reaching up to 600. It becomes even difficult to keep pace with loans and their interests with an unconventional credit score. Also, nobody will trust you enough to rent an apartment on easy terms. In today’s world where our lives revolve around credit, a bad score can greatly impact one’s life.
In simple words, your credit score is largely dependent on the timeliness of your payments as well as your current debt. If you’ve been messing up with these things and ignoring potential payments, your credit score is most likely plummet and most businesses may not even consider you.
Are you suffering from a bad credit score? Well, most of us have messed up with our credit at least once in this lifetime. Therefore, we have come up with this list of the best yet most effective ways of re-establishing credit with minimal strain on your pocket.
Common Reasons for Bad Credit Score
Bankruptcy and divorce – the two most devastating period of our life – can greatly crash one’s credit score. These two situations do not only leave you alone emotionally but also make you financially unstable during the so-called legal battle – making you miss important debt payments. Therefore, make sure to settle your joint accounts, divide the debt payments, and double-check the credit-report to analyze which debts bear your name.
Same is the case with bankruptcy. If the bankruptcy was listed on your credit report, it can lower your credit score up to 600. What to do in such a situation? In a nutshell, make sure to hire a professional financial advisor to look after your legal matters for the best resolution.
Effective Ways of Credit Building from Scratch
Your credit score may take a hit for several reasons, fortunately, there are just as many ways to rebuild it. With that being said, following are 5 simplest ways of rebuilding your credit score and ease your financial problems:
1. Analyze Your Credit Report
The very first step of rebuilding credit score is by going through your past mistakes. If you have a bad credit score, now is the right time to determine your weak spots in your financial dealings. Did you suffer from high debt? Did you have multiple late payments? Were you divorced or bankrupt? Ask yourself these questions and analyze your credit report for the better good.
In addition, an authorized user can check for any fraudulent activity or errors in the credit. There can also be an inaccuracy in your payments, thus, bring it to the bank’s attention for the best resolution. It is better to get a copy of your credit report from the authorized credit department (Experian, TransUnion, Equifax) and consult a financial manager for unbiased advice.
2. Make Arrangements to Clear Your Payments
Your credit score is largely dependent on your payment history. Thereby, after analyzing your credit score history, the next step is to make adequate arrangements for paying up debts and payments. Your credit score situation will only improve by making all your financial accounts up to date.
Concerned about large payments? Well, contact your creditors and ask them to make you a considerate payment plan to pay up your debt. If it doesn’t work out with your creditors, a non-profit credit counselor might be able to devise you an adequate plan to make your accounts up to date.
Make sure to pay down as much as possible as utilizing a great amount of your current credit can again impact your credit score.
3. Get a Secured Credit Card to Rebuild Credit
Once you’re on your way to pay up your payments and debts in the next few months, now is the right time to rebuild credit through a secured credit card. You want to show that you are financially good enough to pay the debt in a timely manner. If so, using a credit card might the best option.
A secured credit card requires you to deposit a security amount before you start using it. And the payment of history of the card will be reported to the credit bureau each month. In this way, making your regular payments through this secured credit card serves as a great deal to improve credit in a short time. However, make sure to use the card for potential purchases you know you can pay off easily.
Here are some of our recommendations:
Self Lender: Has set up fees as low as $9.00 for the first month and payment plans as low as $25.00/mo. The amazing thing about self lender is you are returned the money you pay into the program with a nominal interest rate. This company reports to all bureaus and has an average increase between 25-100 points on your score.
Credit Builder Card: This card works perfectly for people who are on a budget. Its a flat fee of $200.00 to get the card with no credit score requirement. Please, note that while it can take to 4 weeks to receive the card, the low credit balance prevents you from digging deeper and debt. Typical score increase is about 15-50 pts.
Secured & Unsecured Cards: Here is our master link of credit options. You can sort the cards based on your preferences and needs. We can always make a recommendation. Contact us with any questions.
4. Pay Future Bills & Payments by Due Date
It may take months to start seeing an improvement in your credit score. In the worst-case scenario, people suffer from rebuilding their credit score for years. To combat such situations, it is best to develop good financial habits and pay your future bills and payments by the due date.
As discussed earlier, a bad credit score can close several doors to you. So, keep up with optimal financial habits and you’ll never face the same problem again. As an added incentive to pay your bills on time, Experian has rolled out their Boost program designed to give your credit a boost for being timely. Sign up here to take advantage.
5. Improve Your Financial Habits
After you have reestablished your credit, try to improve your spending and saving habits. The best way to keep yourself up to date with your payments is by building a budget report. The budget or payment report must comprise your monthly earning from all sources and how much you spend. In this way, you’ll automatically stay within your financial limits and spending fewer leads to timely payments. Need a little guidance? We have a budget template that can get you started. Email us for the info.
Overall, reestablishing credit has never been easier than following the above 5 steps. Moreover, if you’re looking forward to saving money after rebuilding your credit score, make a separate bank account and try saving a few hundred bucks each month. Take it slow and steady and before you know it, you’ll have a considerate amount in your savings. Note that saving can only be done by lessening your personal expenditures and not delaying important payments. Remember, we offer a free consultation to help get you on your way.
In case of further questions, suggestions, or financial advice, feel free to contact us or simply leave a reply below.