Sitting around with bad credit is never something you want to do. If you have bad credit then you are going to want to take action right away. There are a variety of ways bad credit can prevent you from enjoying life.
According to a study from Card Hub, 24.4 percent of Americans have a credit score below 600. With bad credit you will find it next to impossible to finance a home, have a hard time opening a new credit card account, and find it difficultly to take out a reasonable personal or auto loan. Bad credit makes you inevitably pay more for loans and credit cards, since you have to settle for higher interest rates.
Follow these three pieces of advice if you have bad credit. While they seem simple, many people do not practice exactly what they know will help improve their credit. Use these tips to help motivate you to get started on rebuilding your credit to good standing.
Understand where you stand as a whole
The first course of action to take when you have bad credit is to understand exactly where your credit history stands. Remember, everyone is entitled to one free credit report a year. Take advantage of reviewing a free report if you have not already done so. Verify at least once a year that the information on your credit history is all correct. By getting a copy of your free credit report, you’ll be well on your way toward fixing your bad credit.
Once you obtain your report figure out how much debt you owe as a whole, and where most of your debt is located. Know how much of your debt is from credit cards, loans, or anything else. Also, know which debt is the biggest, and which is smaller. Doing this will help you break down where you need to target your focus on eliminating your debt. Some people prefer to pay off their smaller debt first, while others are more concerned with their bigger debt.
Establish a plan
Having an actual goal with a real direction is the best way to ensure you will work toward establishing better credit. Without a real plan, you most likely won’t commit to fixing your credit over an extend period of time. After you have reviewed your credit history, the next step is to devise a plan that fits with your budget. For instance, if you make $3,000 a month, and your bills total $2,200 a month, you may want to dedicate at least $500 specifically to paying off your debt.
Credit is not fixed over night. Therefore, it is important to remain committed to reaching your goals so that you can get better credit as soon as possible. Once you establish a plan, do everything it takes to reach your goals, or else you may never be completely debt-free.
Avoid hurting your credit in any way
Digging yourself deeper into debt, forgetting to pay a bill on time, or anything else that could hurt your credit are all things you need to avoid. While establishing a plan to actually pay off your debt is important, an even more important plan to follow is to avoid lowering your credit score any more. Above all else, you should take precautions to prevent yourself from not making payments on time. You do not want to improve your credit over a six-month period, only to have it drop back down two months later. Make sure you remain committed to improving and maintaining your credit throughout this entire process, or else you’ll be back to square one.
Gerald is a staff writer at MyBankTracker.com. He is an expert in real estate, mortgages and credit.