A bad credit score can have a terrible impact on your overall finances – and your lifestyle. But it’s important to understand it is not the end of the world. With the right mindset and prudent financial planning, it is possible to repair your score and start getting your household’s money and borrowing ability back into shape. Let’s take a closer look at some of the golden rules of repairing bad credit.
Understand the importance of a good credit rating
The first golden rule is to know what you are dealing with. Good credit scores make your life easier, cheaper, and more manageable – it’s that simple. A poor credit score, however, can have a significant impact on your life. Your borrowing options will be limited. You might open yourself up to the harsh realities of bankruptcy. And you might find that you can’t get a job, rent a property, or even get a contract for a cell phone. It’s that serious – and it should spur you on to make amends.
Check your rating
The next golden rule is to understand your current credit position. You’ll need to check with the major credit reference bureaus such as Experian, Equifax, and the TransUnion. Once you sign up, you should be able to see a breakdown of all your borrowing history, as well as records of your bank accounts and any court judgements you might have against your name. At this point, it’s important to look for any records that you are not responsible for. Sadly, fraud and mistakes are all too common, and it’s not a rare occurrence for credit records to be incorrect.
Tackle your debts
The next step is to highlight all the debts that are causing you problems. Contact them and set up reasonable repayment schedules that you can afford, making sure that you have money left over for general household spending.
Start improving your credit rating
Now you are in a position where you can start repairing your score. And the way to do this is to prove that you are a responsible borrower. Unfortunately, many of the credit avenues you had before maybe closed off to you now, so working out how to get a loan with bad credit will usually result in applying to particular services and lenders. But the point is, as soon as you start paying back your debts promptly, your score will improve, bit by bit. Just borrow and spend small, affordable amounts and keep clearing your balances for a minimum of six months.
Don’t fall off the wagon again
Finally, once you have done all the hard work to repair your credit rating, don’t ruin things by making the same mistakes as before. See this as an opportunity to change the way you deal with your finances, and you should – with a little bit of luck and a lot of dedication – never find yourself in a similar position again. Keep checking your rating, and always update your current budget to ensure you are on the right track.