It’s no secret that having a low budget and a bad credit rating is a rough combination. It isn’t necessarily all the individual’s fault for having bad credit. Rough economic times, losing a job, falling ill, or plenty of other scenarios can lead to damage on a person’s credit. Unfortunately, circumstances won’t matter too much since bad credit tends to follow you around wherever you go. You’ll be hard pressed to find a rental property where the landlord won’t want to run a credit check. When looking for a new job, most employers will now ask to run a credit check, as well. And, of course, making large purchases like a car will be much more difficult.
Time can heal these wounds, like most others, but you could be waiting the better part of a decade for the situation to handle itself. Luckily, there are steps you can take to start improving your credit immediately.
Assess the situation
The first step on an almost certainly long journey is to see just how bad things have gotten. To do this, you need to check your credit report. This can be done once a year for free from each of the major reporting agencies: Equifax, Experian, and TransUnion. It’s actually recommendable to space your checks throughout the year so you can monitor any progress you may have made.
Once you have your report, you’ll want to pour over it very carefully for any potential mistakes you can report to the agency. It also can’t hurt to request the agency to include a note on the report explaining any rough patches that led to your credit being damaged. The report also might help you see unnecessary debts you’ve incurred and help you avoid this problem in the future.
Plan a better budget
Once you’ve assessed the report, you’ll need to find ways to cut as much debt as possible. One of your first steps should be to stop using credit cards unless it’s absolutely necessary to do so. This is one of the easiest ways to rack up debt. Next, you’ll want to calculate how much you’re spending each month and cut costs wherever you can. The general rule of thumb is to initially aim for a 10% cut.
Consider a secured credit card
If a credit card is absolutely necessary for one of your purchases, you should be using a secured credit card. This functions the same as a normal credit card, except it requires a deposit to activate the account, and your credit limit is your deposit. This will prevent you from overspending. This is a low risk and inexpensive way to start building positive credit and one of the best steps you can take.
Results will likely vary, but it never hurts to try negotiating with your creditors. You can try for a modified payment plan to have payments stretched across a period you can handle easier. You also can ask for a reduced interest rate. Failing this, you could try for a debt settlement plan. This won’t be great for your credit, but it will get the debt behind you, which can be just as valuable or more.
Consider a loan
If you have a large purchase on the horizon that you can’t reasonably avoid, it may be worthwhile to seek online payday loans. While you can’t continually rely on these (or you at least shouldn’t), they may be just what you need to get through a tough month. Such loans are generally easy to get, as many companies offering this service don’t check credit reports. Just make sure you can pay the loan back by the agreed time because defaulting on a loan can easily put you back worse than you were before.
Bad credit is always a tough situation to deal with, regardless of circumstances. That said, you do have options, and they should be explored immediately. Putting the problem off is the worst possible course of action.