If you have had several years of financial misfortune recently, it’s likely that your credit score isn’t very good and, if you’re looking for a loan, to buy a house or are in need of a credit card you are likely to be rejected. Of course, this now means that you will be looking to repair your history of bad credit, but what steps do you need to take to do this?
Audit your credit report
It’s frustrating enough that you have to pay for the financial mistakes you have made, let alone being penalised for ones you didn’t make too. Around 70% of credit reports have errors in them, so there’s a good chance that yours does as well. You can get free copies of your credit reports from annualcreditreport.com, where you will be able to fix any errors that you can find.
Alternatively, you can pay for a company to restore your credit report for you. This is especially helpful if you have a lot of negative items on your credit report that are not mistakes but are a long time ago. You can research the average cost of reliable credit repair services online.
Catch up on missed payments
If you’re having trouble keeping up with payments, you can speak to your creditors to come up with a repayment plan moving forward. This will slowly allow your credit rating to recover, and allow future creditors to see that you are capable of making payments on time.
Make a plan, and stick to it
Assess your cash flow and see what the lay of the land is so that you can manage your finances successfully. You will need to create a budget so that you know what you can spend and what you can’t. Cut down on those monthly subscriptions, don’t eat out so often and limit those luxuries until you are back on track, are earning more, or have paid all your debts off.
Get a store card
If you have paid off all your debts and are still struggling to build up good credit, a store card could be a good way for banks and loan companies to put their trust in you again. Store cards are, generally, easier to get approval for, and as long as you pay in full at the end of the month, your credit score will begin to rise. After 6-12 months of building up your reputation, and you still need a credit card or loan, now is your time to try.
Avoid closing cards you have had for a while
What counts towards your credit score is the amount you owe on your available credit. So, if you have had a card for a long time that you keep only for emergencies, and owe nothing on it, keep it open. This will show lenders that you are in control and don’t owe a load of money, even though it is available to you. Alternatively, having too many open accounts can also be detrimental to your credit rating. If you have a couple of accounts which are not in use and you have no intention of using for a while, shut them down.