When you have bad credit, the consequences for your financial situation can be as dire as obesity is for your overall medical health. But there are ways for you to repair your credit, just as it is theoretically possible for you to lose weight. You just have to accept the fact that both credit card repair and weight loss will take a significant amount of time and effort on your part. There are no shortcuts, so to speak.
Here are some tips to get you going if you’re determined to finally repair bad credit:
Make sure you check out your credit report
It may be that things are not as bad as they seem because of a mistake in your credit report. So what you first need to do is to get your credit report, which you can do for free. At the very least, you get an accurate picture of your credit situation and you may even improve things quickly by reporting mistakes.
Identify your bad spending habits
These habits include charging for items you can’t actually afford, trying to pay only required minimum, and forgetting about making monthly payments.
Once you’ve identified these bad habits, you need to stop doing them. It’s just like staying away from junk food and sugary confections.
Pay off the loans with the highest interest rates first
Now that you’re determined to improve your credit, you can’t just pay the interest per month. You have to make a dent on the balance you owe.
You can start by paying off pawn shop loans and credit card debts with the highest interest rates. You can even use your other credit cards with lower interest rates to do so. While this may seem like you’re just rearranging your debt, at least you’re not paying as much in interest.
Another approach is to pay off the debt with the lowest balance. This may make more emotional sense, because it gives you tangible proof that your debt can be repaired.
But the most important thing is to reduce that balance. The total amount of your debt can account for up to 30% of your credit score.
Always pay off bills on time
Your new payment habits don’t just cover credit card debts. They ought to cover all your debts. So you also need to make sure that you pay off your utilities and your medical bills, as well your student loans, mortgages, and car loans.
Cut down on your spending
Some people advise you to use cash for most purchases to avoid getting into greater debt, as this ensures that you only spend on items you actually can afford.
But for many essential items, you may use a new credit card as long as you pay the balance in full each month. Using a credit card and paying on time can boost your credit score, because your credit score reflects your ability to pay a debt fully and on time.
Your credit score can influence your life in so many ways. So make sure you take the first steps in the right direction. It’s not impossible. In fact, 18.6% of consumers have FICO scores between 800 and 850.