One of the best ways for you to save money is to have a good credit score. By having good credit, you might get a lower interest rate on any loans you may need (or even a credit card, if you need one).
But, what if you have bad a bad credit score? Here are the steps you should take to improve bad credit:
Step #1: Get a Copy of Your Credit Report for Free. Before you can fix anything, you have to understand what it is that you are fixing. Therefore, it’s important that you obtain a copy of your credit report first. The good news is that you don’t have to go through a membership based website or pay anything to get your credit report. Every consumer is entitled to his or her credit report at least once per year. There are 3 major bureaus so, I suggest pulling your credit from one of them every 4 months. To get your free credit report, go to www.AnnualCreditReport.com!
Step #2: Check Your Credit Report for Accuracy. Many people who have bad credit only have bad credit because their credit reports are inaccurate. Look at every aspect of your credit report including your employment status, name, address and outstanding or paid loans and inquiries. If you find anything that seems to be incorrect, simply dispute the information by writing the credit reporting agency. In your dispute you should include your name, social security number, a copy of your drivers license and a written statement of any inaccuracies signed and notarized.
Step #3: Deal With Justified Past Due Debts. Now it’s time to face reality and start dealing with justified past due debts. Many people find $25 or $50 past due debts are all that is standing between them and good credit scores. However, if you find that you have hundreds or thousands of dollars to pay back, it’s important for you to start contacting the lenders. Explain to them that you are trying to pay back your debts and create a plan to start paying back that works for you and the lender.
Step #4: Stick to Your Payment Plans. Building your credit score is one of those things that you have to only start when you are ready for the commitment. A late payment or two could be all it will take to erase all the hard work that you’ve put into your scores! Always stick to any payment arrangements that you make with your lenders!
Step #5: Get A Secured Credit Card. Once you are comfortable with your new payment arrangements, it’s time to start creating positive remarks on your credit report. To do so, I always suggest starting by getting a secured credit card. Designed as a tool for those with poor credit, secured credit cards can really help you get your credit up to par fast! The only downside is that you will have to put a small, generally $100.00 security deposit down before you are able to use your new credit card.
Step #6: Use Your Secured Credit Card Properly. There are several factors that go into using your secured credit card properly. Some include obvious things like on time payments and others aren’t so obvious like, the amount of money that you spend on your card. With that said, I am going to divide this step into what I call sub-steps:
- Use Your Credit Card – The entire purpose of getting a secured credit card is to show lenders how you will react to revolving credit and balances. If you don’t use your card, you are cutting a huge factor out, revolving balances! With that said, don’t be afraid to swipe it every once in a while.
- Don’t Spend More Than 50% of Your Credit Limit – When it comes to credit cards, think of them as you being able to borrow more than your friend really wants to lend you. The reality is, spending more than 50% of your credit limit is the first sign of many financial hardships. Doing this will increase your debt to available credit ratio to an unhealthy point!
- Don’t Wait Until The Last Minute To Make Your Payments – Wouldn’t you love it if your boss paid you a week or two early? Well, the lenders love it too! Making it a point to consistently make early payments on your credit card will drastically improve your credit scores.
- Never Make Minimum Payments – When you make payments on your secured credit card, it’s important that you consistently pay at least double your minimum payments. Simply paying minimum payments could show the lenders that you are not capable of paying any other loans. Making at least double your minimum payment however will show that you are financially stable and capable of paying your loans back!
If you follow these steps, chances are, you will be able to enjoy fair to good credit scores in as little as 12 to 18 months and good to excellent scores in as little as 24 to 30 months! I know it may seem like a long time now but, my how time flies! I hope that you’ve enjoyed this article and that it’s given you great ideas for getting your credit score on track!