If you are one of the many individuals in America who is suffering from bad credit, do not be afraid. There is hope for you.
Many, many people struggle with the negative effects of bad credit. It is nothing to be ashamed of.
Once you realize that you have bad credit, however, it is important that you take steps in order to try to improve your credit score. If you just sit around and complain about how your score is bad, nothing is going to change and your score will not improve.
You have to try to improve your credit score and then hopefully you will see results. Fortunately, there are people who have gone before who have staked out what to do if you find yourself with bad credit.
Get a Credit Card to Improve Your Credit?
One of the first things you can do is to get a credit card if you don’t already have one. This may seem counter intuitive, but it can actually be helpful.
Many people have said that you have to have a good balance to have good scores, but this is purely a myth. But having and using a credit card wisely can definitely help you improve your scores.
If you don’t qualify for a regular credit card, you can usually obtain a secured credit card. A secured credit card is different than a prepaid credit card because a secured credit card is where the bank gives you credit to match the amount you deposit in the bank.
This may seem annoying and frustrating, but it is actually in your best interest to not have unlimited credit. If you have a bad credit score, then you probably haven’t been very wise with your credit in the past.
This secured credit card will help you get your spending under control. Another thing you can do to improve your credit score is to take out an installment loan.
Loans Can Help Build Credit
A good way to improve your credit score is to prove that you can handle loans and credit again. Installment loans include personal loans, car loans, mortgages, and student loans.
If you don’t need to have any of these loans, you could consider just taking out a small personal loan. This will help prove that you can handle paying back a loan.
However, it is important to remember that paying back your credit cards will help your credit score more than paying back your loans will. Therefore, paying back your credit card debt should be top priority when trying to improve your credit score.
Try to always have the goal of trying to completely pay off your credit card debt. It may seem impossible, but it is possible if you are determined and make a plan to pay it off.
It May Be Worth Hiring a Professional
You could even consider hiring a professional to help give you advice about how to better manage your finances and credit score. Although meeting with this professional will probably cost you money, the benefits will probably greatly outweigh the costs.
Try to get your balance below 30% of your credit limit. Getting your balance below 10% of your credit limit is ideal.
If you can get your balance to this place, then credit lenders will see that you can handle your credit card appropriately. It is a good idea to pay off the credit card that has a balance that is closest to its limit.
It may seem obvious, but throughout this whole process, it is important to try to minimize spending on your cards as much as possible. The less you spend, the better your score will be.
Lower Those Limits
Another thing you can do to try to improve your credit score is to decreasing your card limits to 30% of the current limit. If you can reduce it to 10% of the current limit, that is even more ideal.
Make sure to always know what your credit card limits are. Sometimes credit card lenders do not update credit card limits online, and so your score could go down if they’ve posted the incorrect limit.
Some credit cards do not have a preset limit, and so the lenders do not have to post a limit because technically a limit does not exist. This can be good and bad.
It is good because you virtually do not have a limit on your spending. It is bad because there really is a limit to your spending.
It is also bad because your credit score will definitely be affected negatively. Throughout this process of trying to decrease your credit score, it is important to not become discouraged.
It may seem like an impossible situation, but you can get help.