Are you at a stage now where you know you need to do something about your credit score because it looks beyond repair? Perhaps you’re trying to get a house or even a phone contract, and you can’t because your credit score is letting you down. Here, we’re going to take a look at what you should do when your credit score is in bad condition.
Bad credit is basically a record of past failures to keep up with payments on your credit agreements. For example bills, bad credit second mortgage, credit cards, and so on. This means you now have an inability or at the very least, difficulty to get approved for new credit. Maybe you haven’t paid your obligations on time, or you haven’t paid them at all. The credit report will also take into account public records, like bankruptcies or legal judgments.
When you have poor credit, a lender will be unlikely to lend you money because of the probability that you will fall behind on any new credit card or loan accounts. Maybe all of your applications for credit have been denied, or you have a seriously high-interest rate on those you have been allowed. The higher interest rate is because the lender sees you as a risk.
Bad credit affects so much more than things like your loan approval and interest rate. An insurance company may look at your credit score when you get insurance. Landlords might require a higher security deposit. Plus, if you are married, it can affect your partner too.
Now that you know why it’s so important to take steps to fix your credit score, read on.
Understand Your Credit Score And How It Is Calculated
Firstly, you’re going to need to understand your credit score and how it is calculated. You’ll want to understand the band and the ratings and what they mean for you if you don’t already. Knowing where you’re at and what it means will help you figure out how to proceed.
Pay Your Bills And Loans On Time
Now, you need to make sure you’re paying your bills and loans on time. If you can, reduce your overall debt. Don’t hold on to any savings while you owe money, as it simply doesn’t make sense and you’ll continue harming your credit score.
You’ll pay more interest over time too, so it only makes sense to use your savings or the money you would have put towards savings to pay off your debts and focus on saving up afterward. It feels nice to have savings, but you’ll spend way more if you don’t pay off your debts as fast as possible.
When it comes to paying your bills, it’s a good idea to set up a direct debit, so you don’t even have to think about them leaving your account. Late payments will always go against your score. Factor them into your money the second you get paid so you don’t have to take them off afterward or realize you haven’t left enough in your account.
Consider Using A Credit Card Responsibly
If you’re not already in debt and you simply need to give your credit score a boost, you could use a credit card – provided you know you’re capable of doing so responsibly. Ideally, you’ll pay off the balance in full each month or at the very least, make a minimum payment and have it set up via direct debit so you don’t miss it. Making more than the minimum payment is always recommended.
Make payments using your credit card strategically. For example, if there’s an expensive item you need to buy that comes with better protection when you use your credit card, such as a new home appliance, it makes sense to use it. However, you should pay it off before using the credit card again. It’s too easy to let the money you owe build up and get out of control.
Get Legal Advice
If you’re sure that the advice above won’t help you, then you might be better off getting legal advice such as Lexington Law credit repair reviews. There’s no shame in getting legal help, and it can help you to get out of this mess before things get even worse.
Dispute Any Mistakes On Your Credit Report
It isn’t unheard of for mistakes to be found on a credit report. Make sure there are no mistakes on yours and if there are, dispute them. This should make an instant difference.