How to Bounce Back from Bad Credit
Maybe you lost your job. Maybe you got divorced. Maybe you’ve been ill. Or maybe you just got in over your head and spent more than you could afford. In any case, the bottom line is: your credit isn’t great. In fact, it’s bad.
The good news? You can bounce back. No matter how destroyed your credit is, there’s always a way to mend it, given enough time. It may take some patience and plenty of diligence, but even the worst credit score can be rehabilitated with some TLC (tender loving care).
Here’s how to recover from poor credit, step by step:
• Make a list. First, you need to know how much you owe, and to whom. List your credit cards and other accounts, along with totals due on each, interest rates, and any other relevant information for each account. If this is overwhelming, contact a credit counselor to help you. There are many nonprofits dedicated to this exact thing. They have professionals who can help you list out your debts.
• Figure out how much you can pay each month. Look at your income and expenses and decide how much you can reasonably pay toward your debts each month. Again, if this step is difficult, a credit counselor can help. Once you’ve done this, you’ll be ready to start chipping away at your debt.
• Set up automatic payments. This ensures your payments will never be late. Making payments on time is essential for rehabilitating your credit score. It’s easy to set up text or email reminders, as well as automatic withdrawals, so you always make payments on time.
• Keep your accounts open. It’s tempting to close accounts once they’re paid up, but don’t. It’s better for your credit score if you can show a long credit history. So leave those accounts open and in good standing. Use them once in a while so the don’t become inactive and get closed by the issuer.
• Apply for a credit card if you don’t have one. In the event that your accounts were closed during your bout with bad credit, apply for a new card. You might consider a secured card, if you are turned down for a traditional, unsecured consumer credit card. With a secured card, you put down a lump sum as collateral, so the issuer has a guarantee that they get paid back if you default on your payments.
• Use credit carefully. Until your credit score is on the upswing, you’ll need to be deliberate and careful with your use of credit. Don’t make purchases without thinking it through first. Know how you’ll be able to pay them off. Pay attention to terms and conditions, due dates, and fees.
• Be patient. It takes time to bring your credit score back from the basement. But even a bankruptcy will be scrubbed from your credit history after ten years—and maybe sooner. So be patient. You’re on your way to brighter financial days.
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