Take These 4 Steps to Mend Bad Credit

Friday, May 8th, 2020
Updated: May 8th, 2020
The content is accurate at the time of publication and is subject to change.

It is absolutely true that bad credit can cause a lot of inconvenience and problems. Having poor credit history, you will not likely get approved for credit cards with great rewards and perks, high credit limits, and low APRs. Moreover, you may even face hardships while renting a house or looking for a job.

Fortunately, all in your hands. Follow the instruction we give below and forget about bad credit score as a nightmare:

  1. Check Credit Reports

The first thing you should do before proceeding with any active steps is prepare by assessing the situation. In our case this means checking out your credit reports from the three major credit bureaus – Equifax, Experian, and TransUnion (note that once a year you can do it for free). And this is where you should not rush. Carefully review all records for mistakes.

  1. Deal with Errors

If after completing the previous step, you will find any irrelevant records (for example, credit accounts that you didn’t open), be sure that you have every reason to dispute those with the credit bureau and the issuer. For that, you will need to write a dispute letter to request the errors to be removed or corrected. By law, the credit bureau must give you a response within 30 days after receiving the letter. Sometimes this action can significantly improve scores.

  1. Clear Up Spendings

Even if your score has increased greatly after removing errors, it is not a reason to stop. The next and one of the most important steps is to analyze and start adjusting your purchases. Most often, poor credit conceals unhealthy financial behavior and excessive spending. Find out which expenses you can reduce and which ones you can totally avoid. With credit cards, it is easy to get carried away and cross the line, but you should always be sure that you spend no more than you can afford. After all, this money will have to be returned, and, most likely, with high interest.

  1. Manage Credit Accounts

Figured out monthly expenses? Let’s go further. Now is the time to take a look at your existing credit accounts. The most essential thing is to get rid of debts and delinquencies. If you have any late payments, try to close them as soon as possible. As you already know, they pull big interest and fees along, thereby putting you in a circle of never-ending debts. Over time, paying off all accumulated debts becomes more and more difficult. If you cannot pay the whole amount immediately, do it in small parts, but pay more than the minimum required, and you will see your debts gradually melting away.

It is not less important to watch credit utilization, which means controlling your use of credit. All you need to do is spend no more than 30% of the available credit limit on each account separately and on all accounts in total. Compliance with this rule can help improve your credit history as well.

Bottom Line

Of course, no one can be secured against bad credit. There may be various life situations (e.g., large unforeseen expenses, bankruptcy, or a difficult divorce), which spoil a credit history to a considerable extent. However, if you do not intend to put up with the situation and are ready to act in order to turn your credit from bad to good, this is the first step to success. The rest is a matter of time and your consistency.

 

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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