You can overcome bad credit. If you have made mistakes in the past, it is possible for you to get back on the right track. By practicing good credit habits, you WILL be able to someday buy that car or home of your dreams.
There are many things you can do to build your credit up and make it easier for yourself to qualify for those things. Raising your score is as easy as paying off any outstanding debt, making consistent payments on time every month, and opening up a secured card.
Rebuilding your credit can prove to be a tall ordeal, especially if you don’t know where to start. Some people are able to do this themselves, and some of them hire firms like ours to help them clean their credit and build new healthy tradelines.
Taking care of your credit and building good credit is an important first step to lower interest rates and higher credit limits. It’s also an important first step towards getting a good, high-paying job.
How to overcome bad credit
So what can you do to start getting your credit back on track? Here are some tips:
- Create a budget. You will need to have some money saved away to start paying down debt
- Control your spending. Start tracking where your money is going. I bet you will be surprised at how much you spend in impulse buys!
- While you are working on fixing your credit – don’t open any new lines of credit
- Pay your bills on time each month. In fact, pay before they are due!
- Focus on reducing your credit utilization. A rule of thumb is to get it down below 30%. If you can, aim for 10% or lower! You will see a big boost in your credit score!
- Invest in credit monitoring. Recently a client came to us upset because she worked on her credit and thought she had a high credit score. But she got turned down for a mortgage. Why? She was using a free credit service that used the VANTAGE credit scoring model. Mortgage lenders use FICO scores! Your FICO and VANTAGE scores can be VERY different! We recommend MyFreeScoreNow they give you your FICO scores from Experian, Equifax, and TransUnion
Other tips for overcoming bad credit
Check your credit report.
The first step towards personal credit repair is to know exactly where you stand. Is the information on your credit report correct? Check your old addresses looking for ID theft. If you see names or addresses that don’t belong to you. It’s a good indication that there may be someone out there applying for credit using your social security number!
Clean up errors.
If you find any inaccuracy in your report, you can have those errors corrected by sending a letter to the bureau that issued your report. Send in a dispute letter stating there are inaccuracies and detail what they are, and what you want the credit reporting agency to do. (update or delete). Upon receipt of your letter, the bureau will conduct an investigation which can last up to 30 days.
Make sure you give them enough time to respond! Do NOT do online disputes! Mail the letters! If you have some really negative items that may require legal action. You want to make sure you send your dispute with a return receipt!
Utilize bill pay
Many credit card companies will encourage you to use their auto-pay function. This is another great option. I just know some consumers don’t want to share their banking info with their creditors. So setting up bill pay from their bank is a better option for them.
Give your payment plenty of time to reach its destination! The US postal mail has been rather slow of late.
Don’t recklessly close credit accounts
A lot of people will close a credit card after they have finished paying it down to a zero balance. Yes, there is a deep satisfaction in paying off debt. But closing those accounts can hurt your credit score!
- It will decrease your available credit – which will INCREASE your credit utilization ratio!
- Make sure it’s not a cornerstone account! Meaning it may be an old account that is giving your credit report some much needed age.
Seek professional credit repair help with caution.
Have you been trying to fix your credit on your own and not getting anywhere? You may need to seek out professional help. Be cautious when choosing a credit repair company! Make sure they are licensed and if your state requires it, they have a bond!
There are a lot of people on TikTok and other social media “claiming” to be credit repair specialists. But all they do is send a bunch of disputes in the hopes that your negative credit will come off.
And sometimes it does. But did you know those accounts can come back on your credit report if your creditor verifies it later on? Even worse. These “armchair” credit repair specialists send so many disputes that the credit reporting agencies will FLAG your account for frivolous disputes! And you will have an uphill battle to get them to pay attention to any further letters from you!
Interview your credit repair specialist. Make sure you are working with a professional!
In conclusion, good credit is vital to your financial future. A lot of people feel overwhelmed when it comes to dealing with bad credit. And it seems like a deep hole that you can’t seem to dig yourself out of. But you can overcome bad credit!
You just need to be patient and follow good credit habits to get back on track!