If you’ve never thought very deeply about your credit, chances are your credit history isn’t the best. Credit histories don’t sit around waiting for you to notice them; they have a life of their own. If you are a North American consumer, there is a credit history out there that tells the story of all the times you missed a utility payment or about that couple of months where you were living on credit. In fact, there are three companies that keep these records, so there’s no way to opt out.
If you have bad credit, there are lots of ways to improve it. You can also work on your credit history itself, which will in turn bring up your credit score. Finally, you can focus on daily practices that are good for your credit score. We’ll talk about these three options below.
- Credit Cards. There are credit cards designed specifically for people with bad credit. Card suggestion sites like Cardsmix can help you with options. Not all cards for bad credit are good for your credit and wallet. Some credit card companies prey on people with bad credit, using sky-high interest rates to pull money out of their accounts for years to come. But there is another breed of credit card company which works to pull people out of negative credit patterns. These are sometimes secured with the person’s own money, which acts as collateral and a de facto credit limit. Others are unsecured, and are meant to provide affordable credit for people willing to use it wisely. Of course, these won’t do you any good if you don’t use them well, which leads us to.
- Daily Credit Behaviors. This is the part where we talk about living beneath your means. If you borrow a lot on credit, you are spending money that you don’t have, which you will have to pay back sooner or later. When the Credit Reporting Agencies see that you have huge balances on your credit card, they assume that things aren’t going well financially. They think that if someone were to lend you money right now, you would be likely to default on the loan So they lower your credit score. In the day to day, you’ve got to spend less than the money you earn, keep very little on credit, and always pay your debts on time. Once you’ve maintained this pattern for a couple of months, your score will rise.
- Work on Your Credit Score. You can access your credit history for free. This will show you any negative items that are pulling down your credit score. Sometimes they will be something you’ve forgotten, like the last electric bill you forgot to pay before moving out of your last house. If you can dispute or resolve these items, your credit score will go up.
Reworking your credit history and credit score isn’t easy, but it’s worth the effort. From then on every time you borrow money it will be a lot more affordable.