Face the Music
If you have negative marks on your credit score, you are likely aware of it. Because of this, you have probably been avoiding facing the music and seeing just how bad it is. However, this is the first step you must take in order to start making things right. You are entitled to a free report from the three major credit reporting agencies annually. From here, you can make a complete list of bills owed as well as review other things such as write offs that will take time to become removed from your report.
Another reason you should check your credit regularly is that nobody's perfect. A simple clerical error can reflect major discrepancies on your report. You should carefully analyze everything that shows up to ensure it's correct. Errors are typically easy to correct and can help raise your score more quickly.
Don't Close Your Accounts
It's important to pay down your credit cards. However, you should avoid closing the accounts completely. Part of your score is calculated based on the length of time you've held accounts, and a long-term relationship with a creditor can reflect positively on your overall score. If you fear having an account will cause you to spend money you can't afford, cut the card up without closing the account.
High Interest Credit Cards or Small Loans
In order to prove you can manage your finances, you must show that you are able to make regular monthly payments. However, it can be difficult to attain this kind of financing with bad marks on your credit. Therefore, you'll likely be facing high interest rates and even annual fees when it comes to applying for a credit card. However, it's a temporary hindrance you must overcome.
There are other options, however. For starters, you could approach a loan officer at your bank and let them know what you're trying to accomplish. They may be able to provide you with a small loan you can put in savings. From there, you can schedule to have payments automatically taken from that account, leaving you to cover only the interest and finance charges. Just make sure you avoid the temptation to make withdraws. If you choose to stick with a credit card, use it to buy things you would normally purchase anyway and pay the balance in full each month. This way you can avoid interest charges.
Secured Credit Card
Another great way to repair your damaged credit is to apply for a secured credit card. Unlike a prepaid card, this option allows for you to receive a credit line, and your payment activity is reported to the credit agencies. The only catch is that you must secure your credit limit with a deposit equal to your credit line. The amounts can vary, and you can often start with as little as $200.
Getting Current Debts Under Control
If you have current debts, it's important to come up with a reasonable plan to get them all paid off as quickly and efficiently as possible. A few tips to employ to get your current debts under control include:
~ Be more aggressive with paying off a debt with a high interest rate as opposed to a high balance. Make the minimum payment on your lower-interest cards and bills until you have paid off others with high interest. When one's paid off, focus on the bill with the next highest rate until they are all paid off.
~ Determine unnecessary expenses such as a cable bill if you never even use it.
~ Create a budget and stick to it.
~ Take cash with you to the store to avoid having the means necessary to make impulse purchases.
Getting Back on Your Feet
Life with damaged credit is difficult, and it impacts you in more ways than most consider. However, you don't have to carry your mistakes with you forever. It takes patience and proactive measures, but you can get back on your feet and prove to creditors, potential employers, and landlords that you can be trusted in financial matters. We all make mistakes. By following these tips, you can be on your way to the financial freedom you need to make it in this day and age.