If you’re currently ignoring your bad credit and hoping the situation will improve on its own, it’s time for a wake-up call. Unless you fix your credit now, it’s likely to continue to grow worse over time. A poor credit score can affect your ability to rent an apartment, buy a car or even get certain jobs. Luckily, no matter how bad your credit might be, you can turn it around with a little effort.
1. Determine Your Credit Score
You might have already accomplished this step, but if not, it’s important to obtain a copy of your credit report. You can access your report at Credit Karma or other sites that offer information based on the three credit reporting companies, which are Equifax, TransUnion and Experian. The companies may report slightly different information, which is why it’s a good idea to check all three.
If you notice anything unusual or incorrect on your report, talk to that reporting company and ask them to fix the error. It might take a bit of effort before you can work out the problem, but it’s always worth it. You don’t want to be punished for something you didn’t do.
If your report shows negative marks that are legitimate, you’ll at least know where you stand. The idea of climbing out of a hole can be depressing, but you’ll get there. The important thing is to keep working at it.
2. Stop Creating New Debt
It sounds obvious, but this is perhaps the biggest factor that people with financial troubles need to overcome. You can’t spend more than you can afford. It’s that simple. If you don’t change the financial habits that caused the problem in the first place, you can’t correct the problem. No more splurging or living in the moment. It’s nice to feel carefree, but it’s nowhere near as enjoyable as true financial security.
3. Design a Flawless Budget
Now is the time to sit down, make a budget and commit to sticking to it no matter what. It’s important that you keep an eye on how every penny is spent. You might make a lot of small purchases, such as a soda at the gas station or a meal at a fast-food restaurant, and not realize that every swipe of your debit card is adding up. Some people spend hundreds of dollars a week eating out when they could easily spend a quarter of that money grocery shopping and making meals at home.
If you need help figuring out a budget, a financial advisor or life coach might be able to guide you through the process.
4. Check Your Income
It’s possible that your financial troubles aren’t due to overspending but simply a lack of proper income. It takes a lot to make it these days. Most people struggle to live on their own and require the help of a spouse, roommates or family members. If you are going into debt from living on your own and can’t bring in more income for whatever reason, don’t feel bad about asking for help. You might have a single friend who is going through the same struggle and could use a roommate.
5. Use Credit—Carefully
Using credit cards and paying your bills on time is a great way to build positive credit. However, you should only try this option when you’re sure that you can be financially responsible. If you struggle with overspending or impulse shopping, a credit card might not be a great idea. If you’re going to be working with a financial coach or counselor, ask for tips and tricks for using credit cards responsibly.
For more information about fixing bad credit, please contact us today.