Why You Should Stop Panicking About Bad Credit

Tuesday, June 3rd, 2014

Many people worry that a bad credit score is the end of the world. But the truth is, bad credit is common. Everyone gets into trouble sometimes and financial messes are nothing to be ashamed of. There are many reasons your credit may be less than spotless, or even downright terrible. Some of the most common culprits:

  • Job loss – Unemployment is still relatively high, even post-recession, and whether you recently lost a job or have been out of work for some time, you may be struggling to meet your expenses. When you have to choose between putting food on the table and paying the minimum due on your credit card, the grocery store is always going to win out. Before you can pay your credit card bill, you have to eat.
  • Illness – Medical debt is a huge culprit in poor credit scores. You may have medical debt you aren’t even aware of that appears on your credit report as being in collections. Insurance company issues, doctor’s offices mistakenly billing you instead of insurance, or loss of medical insurance can all leave you with bad credit, whether justified or not. Often, medical debt is not your fault and there is nothing to be ashamed of.
  • Divorce – Splitting up is one thing, but separating your credit reports is another. When people divorce, it is common for there to be conflict or misunderstandings around who is responsible for paying which credit card bill. That can lead to late payments and defaults on loans, which can drag both parties’ credit scores down. Even after the divorce is final, spouse’s names may still appear on each other’s credit reports, meaning your ex’s financial behavior can continue to affect your credit.

Whether your credit is bad for one of these reasons, or because of something else, there is no need to panic. Having a good credit score is important, but bad credit is not a disaster. In time, any credit score, no matter how bad, can be brought up to a good or even an excellent rating. Here are some tips to fix your poor credit score:

  • Contact a credit counseling agency for advice. If you aren’t sure where to start, call up a nonprofit credit counselor. They can help you look at your budget and make a plan to pay off your debt. They will also help you contact your creditors to get back on good terms and begin the process of repairing your credit.
  • Always make payments on time. Paying at least the minimum amount due on your credit card is absolutely the number one most important thing to do to maintain a good credit score or repair a bad one. If you are having trouble making minimum payments on time, contact your credit issuer right away to let them know. They will often give you options to help you manage your payments and stay in good standing.
  • Make a budget and stay within it. Sit down and figure out exactly how much you’ve been spending and how much you really need to spend. Look at your income and expenses and be realistic about what you can afford. Consider getting another job or doing side work to bring in more income if you cannot bring your expenses down. It’s vital that you know where your money is going and have a spending plan.

Facing up to your bad credit is the first step in fixing it. Don’t be ashamed and don’t panic. Many people have been where you are. Take a deep breath and start on the road to better credit today.

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