Life After Poor Credit
Aug 07
Poor credit doesn’t mean you’ve lost your chance to flourish forever. It does make it hard to find a credit card with decent terms or to take out a loan, though. Luckily for you, these problems are common among Americans, so there exist many ways to help build your credit back and start having the same financial privileges you once had.
So before you get too down on your situation, check out these tips for getting your credit back in order.
Avoid Simple Credit Mistakes
There’s two types of credit mistakes: the ones you make and the ones made by your bank and/or another company with your bank account information. On your end, don’t ever make a late payment. Ironically, a missed payment hurts a good credit score more than a bad one, so it’s really never a good idea to let it happen. Also, try not to ask for a lower credit limit, even if you think you’re helping yourself. You want a large gap between your balance and your limit, and lowering the limit reduces the gap.
Unfortunately, banks and other companies make mistakes with your financial record too. Sometimes banks incorrectly charge you for late payments or other negative items. Check your account status every day. Also, sometimes your credit card limits get reported as lower than they actually are. This also hurts your credit history and needs correcting as soon as possible.
Take Out a Car Loans
Taking out a car loan or any other type of installment loan can help you rebuild your credit. These types of loans are nice because you’re put on a payment schedule and slowly, steadily pay off your bill.
Each payment made before or on time helps improve your credit history, which in turn improves your credit score. And remember, paying before the due date helps get you in the mindset of always having enough money. Also, luckily, many places offer poor credit financing on car loans, so don’t think you can’t get a new car because of your credit. Just make sure you know you can pay it off.
Get a Credit Card
You can use a credit card much like a loan to get your credit back in order, except with a credit card you have more freedom. Theoretically, a credit card provides the fastest way to rebuild your credit. Although, if your credit score falls below 620, it’s doubtful you’ll receive a regular credit card from the bank.
Banks lend replacement cards for situations such as this one. A replacement card requires a down payment on the card before you’re able to use it. Once you’ve proven you can pay money back over time, you’ll eventually build your credit back and “graduate” to a real card. Remember not take out too many credit cards at once, regardless of your credit situation. Doing so leads to fees adding up fast and makes it harder to keep track of all your finances.
So if your credit score is low, don’t fret. Life isn’t over. Just follow these simple steps with discipline and you’ll have your credit history back on track.
Image via Flickr by 401(K) 2013
Resources: http://www.mizozo.com/biz/06/2013/24/6-steps-to-help-rebuild-your-credit.html