Bad Credit? Essential Ways on How to Repair, Rebuild, and Improve Your Credit

A swipe of your card is needed for a very good sale in your favorite department store. The day after, you cannot resist swiping it again, because the latest model of your phone brand is out. Your phone is still in good condition but there is a good offer, you can pay it three months after and freebies are unlimited, the ending – you did swipe it again!

Having no control with your spending either by cash, cards or loans will lead you to difficulty getting your hand on your finances once more. When you are already having a difficult time with your credit then you got to do something to get out of that situation, because it will surely cause a dilemma in your future loan application. Your credit standing would greatly affect your loan approval in the future, as well as, the amount of loan that will be approved. So you must be responsible enough in using your ‘’magic card’’ to avoid a credit disaster.

How Do You Know If You Have Bad Credit?

Bad credit can be defined instantly with our action. If you are already refusing to pay your debt or loan and eventually avoiding debt collectors then you know what bad credit is!

There are also events like, you are now receiving successive calls from lending companies, banks, any other establishments or companies where you owe money, merchandise or items from. You also receive demand letters from these companies urging you to pay your balances. And from these, you can request a copy of your credit report from three nationwide credit reporting companies like Transunion, Equifax, and Experian.

Bonus Tip: You can also request the credit bureaus to stop mailing credit card offers

How Your Credit Score Can Crash

It might be a hectic schedule, lack of interest reviewing your billing statement, and many other more reasons can actually make your credit score slipped out of your control.

  • Closing credit card accounts with zero balance

Whether your account already falls on a zero balance try to complete paying for the balances without closing your credit card account to avoid a negative impact on your credit standing.

  • Letting balances on an open accounts eclipse 30% of your limit

Every card issued to us has its own credit limit, the maximum amount that we can actually borrow. We should not exceed with our credit limit because it will actually lead to an additional charge incurred. We should try our very best to make a plan on how to properly manage your accounts. At least have a 30% margin for the credit us.

  • Missed payments

Paying your balances on time can actually give you a good credit score since 35% of your score depends on how responsible you are on fulfilling your obligation paying your loans or bills on time.

  • Applying for a new credit

Applying for a new credit when you already have an existing one create a not so good impression to your lender and make a bad credit score.

  • Declaring bankruptcy or allowing an account to go to collection

By declaring bankruptcy and letting your account go to collections department can actually destroy one’s credit reputation. How do you think lending companies think about your application if you already had a record of this bad practice? It is still better to settle things the hardest way than to destroy your whole credit ratio.

Money Buffalo Tip: Declaring personal bankruptcy or defaulting on a loan will remain on your credit report for seven years.  Either event will negatively affect your credit score for the next seven years, and it can jeopardize your approval chances for future credit applications.

How Can I Improve My Bad Credit?

In the event that you are or people around you are in chaos with your bad credit there’s no need to lose hope because there are different alternative ways that we can help you with.  First, you have to secure a copy of your credit report to assess what leads you to this. Then, try to pay your credit balance the best that you can. Commit yourself to paying the balances on time and see to it that you include this in your budget. Don’t attempt to open another account if you haven’t completely paid off your old accounts. And lastly, keep on monitoring your good credit score. 

Check Your Credit Report

It is important to properly monitor your credit reports for free. Through this, you will be able to identify fraudulent accounts and immediately check for errors which may affect your score.  This will also give you a chance of improving your credit ratio.

Dispute Credit Report Errors

It is important to file a complaint in any report that is inaccurate. There are different methods used in settling credit repair issues. Be sure to correct any mistake you find that could affect your score.

Catch Up On Any Missed Payments

Always remember that in any issue there will always be a way for settlement. If you are having a hard time paying your debt on time and in full you can contact your creditor to help you find the best possible way to pay it. You can also seek the assistance of a non-profit organization to help negotiate on your behalf.

Money Buffalo Tip: Try contacting your lender first, they might offer a reduced (or zero) interest rate for one or two billing cycles.

Pay Your Bills On Time

Paying bills on time and without delays especially under your name will give your name a good credit reputation this will also increase your credit score. So, pay it in advance

Avoid Closing Credit Card Accounts

Someone should also avoid closing their credit card account because one’s payment history on paying their balances would be a basis on your credit score.

Use a Secured Credit Card

A secured credit card is a type of credit wherein the bank requires you to deposit an amount equivalent to the credit limit of the card wherein they can deduct the balance obtained by the credit card. This is greater assurance that the balance will be paid because there is a fund for it.

Money Buffalo Tip: Even though you have a security deposit, you are still responsible for paying balance in full every month. Not doing so will hurt your score just like an unsecured card that doesn't require a security deposit.

Obtain an Installment Loan

An installment loan is a type of loan that will be paid with a set number of periodic payments here the amount to be paid will be divided into the terms that would be agreed upon by the lessor and the lessee. A mortgage is also an example of installment loan wherein you don’t need to pay in full and instead you pay it in minimal amount that would not be hard for the lessee to pay. Through this, you can pay different debts at the same time.

Practice Good Financial Habits

All of us need to have a good credit standing because it mirrors our reputation on how good we are in paying our obligations and here are some tips that are so easy to follow.

  • Avoid owning numerous credit cards.
  • If you already have several credit cards, try to choose which will be kept and discarded base on the company’s best offer.
  • Avoid maximizing the use of your credit cards.
  • Only charge a minimal amount to your credit line, 10% of the maximum credit limit is fine.
  • Always pay your credit card balance in full each month.
  • Don’t ever miss your credit due dates to avoid additional charges
  • If you happen to have trouble paying your balance in full pay at least the minimum amount required and pay it on time.

All of us need to be patient in trying to rebuild our credits. Though it is not easy to crawl for our debts, but there is always a way to settle it and live free of debts.

Kate Manning is an outreach community specialist for First Choice Finance. She loves to write about personal finance and the world that circulates around it. She loves cheap Italian wine, sunshine, eating copious amounts of carbs, running, writing, and music.

Josh founded Money Buffalo in 2015 to help people get out of debt and make smart financial decisions. He is currently a full-time personal finance writer with work featured in Forbes Advisor, Fox Business, and Credible.