Bad credit can hold you back in your personal and professional life. And while it may seem like an overwhelming task, repairing and rebuilding credit is a feasible endeavor. You just need a plan.
Understanding Your Credit Score
“Credit scores are a three-digit number, often ranging from 300 to 850, with 300 being the lowest credit score you can have and 850 being the highest possible credit score,” credit expert Latoya Irby explains. “The higher your credit score is on the scale, the better your credit is.”
Anything above 750 is considered excellent credit. Anything in the 650 to 750 is considered good or very good. It’s when you dip below this mark that things get a little dicey. And if you’re below 600, you’re in big trouble.
A bad credit score sends warning signals to lenders that you’re a high-risk individual who doesn’t possess a track record of paying balances and bills on time. As a result, you’ll often get denied for loans – including car loans, mortgages, and credit card applications. And if you do get approved, your interest rates will be sky-high.
5 Tips for Repairing Bad Credit
So you have bad credit? While it’s definitely not a great place to be, it doesn’t have to be a death sentence. Here are some ways you can claw your way back into a positive place:
- Check Your Credit Report
It’s one thing to check your credit score on one of the free websites. But this simply tells you what your score is. It doesn’t do much in terms of helping you understand what’s dragging your score down. To figure this out, you’ll need to obtain a copy of your credit report and analyze what’s found inside.
- Dispute Negative Marks
With your credit report in hand, you’ll see the negative marks with your own eyes. And don’t be shocked if you find a couple of mistakes. It’s common for these reports to have errors. The good news is that you may be able to get them removed. In doing so, you’ll notice an immediate bump in your score.
- Make Timely Payments
When it comes to the debt you currently have to your name, the best thing you can do is make timely payments and to pay down the balance. This shows that you’re serious about managing your debt and ensures your situation doesn’t get any worse.
- Use a Secured Card
You generally need some credit to prove your creditworthiness. But the irony is that most lenders aren’t going to extend credit to you. This can leave you in a cycle of despair. But there are options – including secured credit cards.
“Secured credit cards are credit cards that require an upfront amount, usually the total credit limit, that ‘secures’ the credit card if you should not pay the balance,” CardGuru explains. “The credit card company views this as a very low risk offer to you. A good example of this type of card, is that they require you to pay $250 at the time of issuance, which affords you a $250 balance that you can spend.”
Secured credit cards aren’t the best, but definitely pursue one if it’s your only option. By practicing discipline with a secured card, you can eventually prove yourself and obtain an unsecured card.
- Let Time Pass
When repairing bad credit, you can’t circumvent time. While you can make a lot of smart choices, you ultimately have to let the weeks, months, and years pass. Eventually, negative marks on your credit report will be replaced by positive ones, and your score will elevate to reflect your newfound responsibility.
Discover Financial Freedom
When your life is characterized by a mailbox full of bills, constant calls from creditors, fights with your spouse, sleepless nights, and uncertainty about the future, happiness seems like an elusive dream that will never be fully realized. But life doesn’t have to be like this.