Fixing your credit score is about ensuring your eligibility for lower interest rates and better terms. You may need a good credit score for borrowing money for personal reasons such as home loan, a car loan, to get a credit card, or for professional/business motives such as purchase inventory, new hiring, managing operations, etc., to start or grow your business.
Fixing your credit score is a little like revamping your professional network: You only consider it when it is needed. But if you have damaged credit, it’s almost impossible to fix that situation overnight.
That’s why you need to start fixing your credit now before you really need it.
Luckily, it’s not that tough to fix credit score.
Here’s the 5 steps process you can follow:
1. Identify why you have a credit problem
Some people focus on easier and conventional solutions like declaring bankruptcy and don’t take the time to assess how they got into a financial mess until they face the prospect of a second or third bankruptcy that leave a big wrench in their financial life. It is important to figure out why you got into the trouble you are in so that you can learn from your mistakes and not repeat the same mistake twice.
2. Create a Spending Plan
One of the major reasons that a lot of people face credit problems and low credit scores is they don’t understand the importance of having an efficient spending plan in their lives, or if they do, they don’t follow it. A spending plan could also be called a budget. If you really want to improve or fix your credit and maintain good credit standing, you have to have a spending plan or a budget. Without one, you will end up spending more than you earn and may face the troubles afterwards.
3. Deal with your debts efficiently
Pay down your balances: Once you make a spending plan or budget in place with effective implementation, you can look at dealing with your debt. The best way to manage your debt that is causing credit problems is to start paying it off.
Make payments on time: If you are late on any payments, do your best to keep on track. If you don’t catch up your late payments, then they will report you on your credit report as being overdue. Your credit report will look worse and worse over time. If you can’t make up the missed payments, contact your creditors and see if they are willing work things out for you to get things back on track. If they lender denies, contact a non-profit credit counseling service to help you in this situation.
4. Seek Help from Your Friends and Family
Your friends and family can also help you in re-establishing your credit, here’s the ways they can do this (if they are willing to).
- Allow you to become an authorized user on their credit card.
- Act as a cosigner for a loan you might not qualify for otherwise.
- They open a joint account with you.
5. Make your payments as agreed
Once you’re on track, payment wise and are now paying your debts on time, it is important to continue paying on time as agreed if you want to fix or improve your credit. This is the simplest way to restore and retain a good credit standing. Pay on time every month, and manage your spending plan and everything else should take care of itself.