4 steps to rescue a badly damaged credit score

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4 Steps to Rescue a Badly Damaged Credit Score

Borrowing money is an unfortunately reality of life, and whilst it would of course be ideal to never be in debt – if you want to have nice things and a nice lifestyle it is sometimes necessary to borrow money.

Because of this, it is also beneficial to have a good credit rating, so that you can access that credit when you do need it. In general the better your credit rating the less you will pay for credit and the more easily you will get it when you need it. But if you have a less than ideal track record you might find it hard to even start to improve your credit score.

Fear not though, this post gives you a simple guide to repairing a tarnished credit record, quickly and effectively:

4 steps to rescue a badly damaged credit scoreStep 1 – Take Control Of Your Debt

If you have bad credit you must have had some credit at some point. Hopefully you have some of that still available (but if you currently have no credit sources then move on to step 2).

Start by writing down all of your outstanding debts and write a budget and a plan for paying them off. Your first goal should be to get some debt paid off without further hurting your credit, so it is vital that you don’t miss any more payments or go over any limits. If money is tight you need a little discipline.

Any structured debt needs to be paid off in full, as you pay off outstanding loans or finance your credit score will improve and that alone may be enough to get you started. Unstructured debt such as credit cards and overdrafts are ideal tools for building your credit, so get any long term balances paid off, but keep the facility open if possible.

Step 2 – Get A Job

If you already have a job then move on to step 3. If you don’t have a job then you need to get one if at all possible. A job won’t directly help your credit, but if you have a predictable and strong income you will find it much easier to obtain credit, even with a poor credit file.

Often people who are refused for loans incorrectly assume that their credit is not strong enough when in reality the problem is that they have too little income to convince the bank that they can pay back the money.

Step 3 – Start Using Credit

Hopefully you have either a credit card or an overdraft still available from step 1. If so all you need to do for now is use them. Make sure you use them carefully though, as any slip ups will hurt your credit and your bank balance.

If you don’t have any credit available then now is the time to start applying. Which forms of credit you take out depends on how bad your credit is. If your credit is very bad there are a few options and if you can afford them you can use one or more to get the ball rolling:

  • Phone Contract
  • Payday & Bad Credit Short Term Loans
  • Store Cards

Of course these forms of credit can also be expensive and it is important that you use them carefully and pay them off in full as soon as possible. Don’t take out too many forms of credit too soon, just borrow small amounts and pay them back.

Step 4 – Keep The Ball Rolling

Check your credit report on a monthly basis and check what your score is. As your credit score improves you should be able to start applying for more ‘regular’ forms of credit, and soon enough you should be able to get yourself a credit card (probably the most convenient way to improve your credit).

Don’t apply for too many too fast, you only need one. Just apply for a reasonably small limit as and when you think your credit score is good enough and if you get rejected, wait another month or so before considering another application.

Summary

As you use credit responsibly your credit rating will of course start to rise. This is not a fast process and there isn’t really a lot you can do to rush it, so try to be patient. As you follow these 4 steps you will see your credit score improving, but your overriding goal should be to stay on top of your debt and making sure that you don’t fall back into those old habits that ruined your credit file in the first place.

Author’s bio: This piece of financial info was brought to you by Ricky from this website about currencies, money and exchange rates. Thanks for reading.

Image credited to http://www.flickr.com/photos/59937401@N07/7214450550/sizes/z/in/photostream/

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