Smart Ways to Overcome Bad Credit

Is bad credit keeping you awake at night? Unable to get loans or credit because your credit score is low?

56% of the population has problems with their credit score. Due to this, they cannot get the best mortgage rates. This is because the best interest rates for loans are reserved for those with a good or high credit score.

What Is Bad Credit?

You already know that the credit score range has specific benchmarks. The closer you are to the 900 mark, the better your chances to get the best credit will be. The further you are from the 900 range, you will get appropriately downgraded credit.

If your score is too low, lenders would not want to give you any loans at all for fear of inevitable loss. Bad credit is synonymous to a poor credit score. When you have so much debt that you are unable to pay back the loan on time repeatedly, it leads you to bad credit.

Bad credit considerably reduces the chances of your getting further loans even during emergencies, as it also adversely affects your creditworthiness.

The effect of bad credit on your credit score is a problem. With a bad credit record in your credit report, you won’t be able to get loans, especially during emergencies. 

Even if you do get credit or loans, they would not have the best conditions or terms. Most likely, there will be a high APR (Annual Payment Rate), a high-interest rate, or a long-time payment plan. 

However, all is not doom and gloom.The silver lining to the dark cloud of bad credit is that it can be improved with a few proven strategies.

Six Ways to Get Over Bad Credit

Here are six tips for improving your credit score and getting rid of bad credit. These are highly effective, and the only downside is that they take time to produce any results.

Check Your Credit Report

The very first thing you need to do is to check your credit report. This report has all the necessary data to calculate your credit score.

A mistake or miscalculation in the report will likewise affect your credit score. When you do get these reports, check for any errors. In particular, pay attention to payments and sums. These have a higher likelihood of showing errors.

In case you do find errors, let the concerned credit bureau know. Write a letter listing the mistakes, along with verified supporting documents as proof. Highlight the error to make it easier for them to follow up on it.

Set Automatic Payments or Payment Reminders

One of the most common, and very unfortunate, reasons for people missing monthly payments is that they forget to pay. To ensure that it does not happen to you, set payment reminders. Otherwise, talk to your bank’s representative to set monthly debit from your account. 

Remember that late payments are penalized in the credit report by lowering your score. Hence, when you automate your payments, you remove a significant risk to your credit health.

Plan Your Finances

This step might not be easy or even possible from the very beginning. It needs to be done to salvage the situation.

Use credit cards as little as possible. Create a payment plan that facilitates paying off your credit cards with high interest first. At the same time, keep paying the minimum payments on the remaining credit card accounts.

Don’t Shut Down the Old Accounts

Is a bad payment history giving you nightmares? If so, you do not need to close down the old credit accounts. 

First of all, doing so will not remove bad payment history. 

Secondly, closing down your old accounts can make your credit history seem shorter and can negatively affect your credit score. Rather than removing old credit cards, you can use them the bare minimum needed to keep them active. 

Keep Inquiries to a Minimum

While you can make an inquiry regarding a credit card at any time, too many inquiries can bring down your credit score by a significant amount. 

Your credit score is affected because when you make an inquiry, as a potential creditor also makes a hard inquiry with the concerned credit report agency. Too many of such instances can be harmful to your credit score.

Be Responsible for Your Finances

Even if you follow all the steps above, you still may not be able to solve anything if you don’t become financially responsible. You can do this by using your credit card responsibly, differentiating needs from wants, and having a six-month emergency fund.

Conclusion

As you can see, it is not impossible to remove bad credit. The only problem is that the effect is not immediate. It takes time, but the time taken will be well worth it. 

Use the tips given above, and regularly check your credit score to keep track of progress. If you are still having trouble nursing your credit to health, you can always approach mymoneykarma. We offer credit repair services that not only save you time and effort, but are also easy on your pocket.