5 Simple Steps You Can Take To Help Fix Your Credit

We all want to make sure our finances are working for us. Wielded the right way, credit can be a powerful tool for helping you make long-term financial decisions that might be out of your reach based on your bank account alone. But if you use credit cards too much, it can also leave you drowning in debt with a tanking credit score. So how do you make sure you’re using your credit the right way? And if you’ve got a bad credit score, how do you get it back to something approaching normal?

Bad credit might not seem like an immediate problem, but finding a credit card to fix credit can be vital for your financial future. Firstly, the stress of having bad credit can be difficult to deal with. Having this kind of financial burden hanging over your head every time you go to rent an apartment, buy a car or even swipe your credit card at the grocery store can make you feel hopeless, like you’ll never escape the decisions of the past. 

Secondly, you’ll have a much higher interest rate on credit card and loan repayments with bad credit. This will make it harder to pay these back in the future, and can rapidly create a downward spiral. You can also be outright denied for things like cell phone contracts and even jobs with a bad credit score.

The Upsides Of Repairing Good Credit

 Deciding, ‘I’m going to fix my credit’, is vital for digging yourself out of these problems. If you fix your credit, you’ll get much less harassment from debt collectors. The relentless calls and letters will stop, as will the movement of your records from one collection agency to another. You’ll also no longer have to rely on co-signers to take out loans. Now, banks will take you at your word. 

Credit can also affect your insurance premiums, and if you improve it, you’ll no longer have to shell out as much for car insurance, life insurance and more. It’ll also mean there’s less financial pressure on your spouse, as they’ll no longer automatically have to take on loans for your family to ensure lower interest rates. You’ll be able to proceed with confidence in your financial life, knowing you no longer have to be afraid of your credit score. 

5 Steps To Help Fix Your Credit

If you’re ready to find a credit fixing credit card or other solution, these are the steps you need to take. 

1) Identify Why You Have a Credit Problem

The first step to fixing a problem is understanding it. Sit down with your financial records and take a long look at what you’ve got. Where exactly has your bad credit score come from? Maybe it’s something beyond your control, like a medical emergency, unemployment or divorce or separation. If so, then you can move on to the next point. If the bad credit score was a result of something controllable, understand why it happened as much as you can. This way, you won’t repeat your mistakes. 

2) Create a spending plan

A spending plan, or a budget, is vital for making good financial decisions. Outline the necessary bills you need to pay each month, and check against your income to ensure you’re still in the black. If you are, then it’s on to the next step. Set aside a certain amount of your income each month. This will go into a savings account to become your emergency fund. That way, you’ll have enough to live on even if something goes drastically wrong with your finances. You’ll also have better control over your money, and ensure you’re not digging yourself into the hole further with unnecessary purchases.

Now it’s time to once and for all fix your credit score. If you’re having any problems with credit, you need to start paying your debt, particularly if you are using 75% or more of your credit limits on any credit cards. Catch up on late payments as well, as these automatically appear on your credit report. There are credit counselling organizations who can give you guidance on how to do this, and to work out an affordable monthly way of repaying it. 

4) Make your payments as agreed

After all this, it’s time to make your plan consistent. Make your payments on a regular basis exactly as you’ve set out. Financial experts recommend two methods of repayment: the debt avalanche and the snowball method. With the debt avalanche, you focus on paying off your high-interest debts first to remove the biggest burden first. With the snowball method, you start with the smaller debts, and as more and more of your income is liberated from them, you can get rolling faster towards the bigger ones. Figure out which method works best for you and your situation, then follow it. 

5) Re-establish credit

However, you don’t need to wait till all your debts are paid before using your credit cards again. In fact, you probably shouldn’t. The reason for this is that you need to have active credit to have a good credit score. Without anything positive going on, you’ll either have a negative score or no score at all. To fix this, establish a line of credit that you know that you can pay off responsibly. That way, you can build a positive record back on to your credit score. 

Conclusion

Of course, when it comes to big financial decisions, it’s always best to do your own research. Take your time, shop around and find out what decisions around your credit score will work best for you and your situation. But these steps are a great starting point for fixing your credit. Use these and completely transform your financial life.

References

1. “How To Fix Your Credit In 7 Easy Steps”, Forbes, accessed 26th August 2021, https://www.forbes.com/advisor/credit-score/how-to-fix-your-credit/.
2. “The Side Effects of Bad Credit”, The Balance, accessed 26th August 2021, https://www.thebalance.com/side-effects-of-bad-credit-960383.
3. “5 Steps to Re-Establish or Fix Your Credit for Free in Canada”, MyMoney Coach, accessed 26th August 2021, https://www.mymoneycoach.ca/credit/fix-credit.
4. “15 Reasons You Need to Fix Your Credit”, The Balance, accessed 26th August 2021, https://www.thebalance.com/reasons-to-repair-bad-credit-960379.