Tuesday, 23 June 2020

How To Repair Bad Credit Score


If you are reading this article, you are probably trying to either get a mortgage, a credit card, a car, or something that you need at this moment. One thing that you need to understand is that nothing can repair your credit score overnight unless there is an error on your credit report. That's the only thing that can change your credit score overnight. The tips that I am about to give you are tips that will help you in the long term. This can take 3 to 6 months to come back to a good score.


Tip 1. Do Not Cancel Your Card Even If Its Maxed Out 

If you paid them off, do not cancel them. If the company that you owe money to canceled your card, there's nothing you can do about it, but if that's not the case do not cancel the credit cards. Keep them away from you so that you cannot use it, get those cards away from you and that's just the major thing.


Tip 2. Use 1 Card

When you are using that one card it has to have a low balance. Do not be using a $9,000 card limit because then you are going to be tempted to spend more than you need to be spending. Get a card that's like a $50 card or a $500 card, that card should be enough to cover your basic expenses, not your more mortgage, not bills. We are talking about payments like your gas or your food or stuff that you buy every single day that you constantly have money for. Let's say you have $200 for gas every month and you have $300 for food every month then you are going to get a card that has a limit of $500. Then when you go to buy gas or food you are going to use that card. That card limits so you know that you cannot overspend on that card because if you overspent on food, you won't have enough for gas. 

What you do with the money that you have which is coming from your paycheck, you take that money and you put it into a savings account and then when the statement comes for you to pay back bill or to pay that credit card, you pay it off.


  • You still need an emergency fund, an emergency fund is very important. Whatever money you decide that you were going to put towards your emergency fund do it. Because if an emergency does come up your credit cards will not matter to you. What will matter is the emergency fund. So look at what your priorities are. You put them toward your emergency fund, you have the money for groceries and food, your rent is paid, you take care of your bills that are necessary, make sure those are covered. So now, there's the small card that is constantly being used which is giving you good credit information in the sense giving the credit bureau good information about yourself. Even though there's bad information about you in their report and in their system you are still creating good information. You take that $500 and you are going to constantly be saving that amount of money on your card when this statement comes in, you take all the money that you save you put it on the card you clear it and then that's how you keep having a good report with the credit bureau. 

There's one card doing good, now, the other card that has been doing bad, you are going to constantly be putting money on those cards you cannot use it, it is hidden, forget you even knew the number by heart. And you are going to constantly be putting every extra penny, every extra cash, you are just paying it down, once the cards are paid off, you are going to ask the credit bureau to send you a letter saying that it's been paid in full. You are going to take that letter and you are going to put it in a box that you can reach at any time because what's going to happen when you have a bad credit record, if the card has been closed or whatever the case may be with that card, you are going to have to prove the bank if you are getting a mortgage or a car loan, you have to prove to them that the card has been paid off. And some companies don't report to the credit bureau every single month, some companies report every three months, some companies report every six months. So you are going to have proved that that card has been paid off or that loan has been paid off.


Tip 3. Use The Same Bank For Everything 

This is a wishy-washy rule, if you know that you are bad with credit, you do not want to have your bank account with that same thank. The bank has the right if you do not pay your card to actually going to your bank account and take the money to pay the card off. And you do not want that if you are not responsible with money. But, the upside, that's why this rule is wishy-washy. If you have a savings account and a bank account with that bank they are more likely to give you a credit card with them, sometimes it is a secured credit card and sometimes it is not. A secured credit card means that you gave a deposit to get the card. Let's say you wanted a $500 card and give them $1,000 deposit and then you will use $500 off that card, or you gave them a $500 at the deposit and you will use $500 as your limit on that card. So if you do not pay, they have a security measure to get the money back.

But when the bank sees that you are paying the card a regular basis which is what you are doing which was my last tip. And then you are saving money on a regular basis, now, saving money is not the same as what I was saying before, because, yes, you are taking the money for your groceries and you are putting it on that card, but you also have that emergency fund. Those are two different accounts, there is the money you save for your groceries, then there are your savings towards your emergency fund, and the bank is watching you save. So when it is time for your mortgage or a car loan or whatever the case may be, the bank is going to see over time, this can take months to years, the bank is going to see that you are paying card on time. 

You are paying off all your debts as a responsible adult. You have the money-saving for your emergency fund that's constantly growing. So it is showing your responsibility to one person. It is like, if you were a bad kid, everybody knows you are a bad kid but there's one person that you are good too, and they will defend you no matter, there's that one person that knows you, that will trust you, and give you anything you want because they know the quality of you, well, this is the relationship that you want. With your bank, you create this circle of trust, you having this trust it is showing that a bank trusts you there's somebody out there that puts their faith in you. Because what happens with bad credit is that you lose trust, you lose trust with your lenders and they just like, sorry, can't give it to you. because you did not pay this on time, but when you have those letters saying that I paid these all up and full, and I am saving and everything is good in my life, well, this is how you regain that trust. This is how you repair your credit score.





Conclusion

As I said, it is not going to happen overnight it is going to take some time but those are three things that you can do to just get the ball rolling, the worst thing you can do is go and ask for loans everywhere that just messes up your credit even more. The more loans you get, the worse your score is getting, the next worst thing that you can do is to go and get a car loan. I know a lot of people will go and get a car loan even with bad credit. 

Do you know why those car companies or even mortgage companies or loan sharks why they want you because you are the person who's desperate enough for money, that you will pay whatever interest rate that they give you, there are some companies that will charge people 29% interest, and some people say, oh no, it is 9%, it is 9% until you do not pay them on time, and then they have a right to add percentages to the money that you owe, and you never get out of it? And they like that, that's how they build their business and that's what they do. Do not fall to that trap, do not be credit hungry, do not run around trying to get credit because it does not help anyone, it does not help you and it does not help the future you either. 

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