Lots of people have bad credit these days, especially with the relatively recent collapse of the economy. If you have bad credit, there is no magical way to “fix” it, although you can “correct” it slowly, over time, simply by getting on top of your debts, taking care of them responsibly, and then letting that new, responsible behavior appear on your credit report to represent the “new” you.
The thing about bad credit is that it’s time sensitive. That means the older the bad credit is, the less likely it’s going to have a big impact on your present day score. What does that mean for you when it comes to fixing bad credit, then?
What that means is that you need to begin to be responsible with your finances NOW. If you’ve run up a lot of credit card debt, stop. Cut up your credit cards or at the very least put them away someplace where you can’t easily get to them, and begin to pay them off.
You can use a credit-counseling agency to pay off your credit card debt, but in fact, this is going to a waste of money for you. Not only will the credit counseling agency take part of the payments you give them as their fee, but in fact, what they do may not show up on your credit report at all. Instead, put the money you would pay a credit-counseling agency toward paying off your debt.
So, sit down and figure out your budget. How much do you have coming in in net income (after taxes), and how much do you have in NECESSITIES going out? That is, rent, mortgage, food, utilities, car payments, student loan payments, and so on. “Necessities” do not include trips to the mall to buy clothes or other items/services you want, but don’t need.
Once you’ve got this broken out, you should have a certain amount of money left over at the end of every month. Now, take that extra money, and put 10% of that in savings for an emergency fund. DON’T spend that 10% in savings on anything but unforeseen necessities, like paying for basic expenses because you’ve lost your job, or paying for a large medical bill that has suddenly appeared that you weren’t expecting.
Now, take the rest of what you’ve got left over, and put it toward paying off credit card or other debt. For all but your highest interest rate credit card, pay the minimum payment, and then put the rest of the money you’ve got toward that card.
Do that until this first card is paid off, and then move on down the line, starting with the next highest interest rate card and repeating the procedure. That is, pay the minimum payment on all but the highest interest rate card, and apply the balance of what you’ve got left to that card. This should help you pay off your credit card debt very quickly.
This also works for other kinds of debts as well, such as car loans, and so on. The point is, by being responsible with your debt by paying it off, and by paying your bills on time, you’re going to improve your credit rating simply because you are now acting responsibly.
Keep it up, and you should see your credit score began to rise markedly. Within two years, your so-called “bad credit” behavior won’t matter nearly so much as your new, responsible “good credit” behavior. So begin to act responsibly with your finances and credit now, pay your debt off, and you’ll soon have truly good credit.
By: Norman Burr About the Author:
Brock
