[Photo credit: Lending Memo]
In today’s society, credit is king. You need to have a good credit score to purchase a home, a car, or any major appliances using anything but cash, so it’s a good idea to put some effort into improving your score. Of course, if you have run into difficulties with credit card or loans in the past, you will have an uphill battle ahead of you.
Remember that you cannot repair your credit score all at once, as it will take time to chip away at it. As long as you come up with a plan and follow it closely, however, you can get your credit rating back on track and begin making major purchases once again.
Have a Budget
Coming up with a personal budget is a good idea for everyone and is especially important for those who have struggled with credit in the past. The last thing that you want to do is end up back in debt, so develop a budget that you can stick to and do not go beyond it.
Do not estimate what you can afford to spend each month, but rather put your income and expenses into a spreadsheet and keep track of everything. The spreadsheet will allow you to see what you are spending on bills and food, so you will know how much extra money you have. It is also a good idea to put money into a savings account every payday, just in case you need it later on.
Sign Up for a Secured Credit Card
Depending on how much damage you did to your credit rating in the past, you might not be able to get an unsecured credit card. If this is the case, a secured card might be your only option. Secured cards force you to pay a deposit and your credit limit matches that amount.
For example, if you give the company a $500 deposit, you will have a $500 credit limit on your card. This option works well for all parties involved, as it eliminates the financial risk for the bank and gives you access to a credit card without the chance of you going into credit card debt. If you prove that you can handle this type of card by paying the balance off monthly, the bank might eventually give you an unsecured card.
Use Store Credit Cards
By far the easiest credit cards to get are the ones issued by department stores. These cards have low limits and can only be used by the store that issues them, but are a great way to rebuild your credit. Make some minor purchases on the card and pay it off right away to help improve your credit score.
Creditors will see that you have handled the credit card without going into debt and might be inclined to give you a real credit card based on your actions. It is a good idea to stay with one credit card in this situation, since having multiple cards makes it more likely that you will slip up.
Put Bills in Your Name
If you live on your own, all of the bills will be in your name, so this will not be an issue. Those who live with a spouse or roommate, however, might want to put some of the bills in their own name to improve their credit scores. Every bill that has your name on it influences your score.
As long as you are able to pay your bills every month, your credit score will gradually improve. As you make these monthly payments, creditors will see that you can handle your money and could grant you credit cards or loans in the future. This is especially important if you have been unable to secure any form of credit, since your bills are the only thing that will show up on your new credit history.
Keep Track of Your Score
One thing that many people with credit issues do is ignore their credit score. They often do this because they know that their score is not good enough to apply for a loan and, therefore, don’t think it‘s worth it to track the numbers. This can be a bad decision to make, however, as mistakes do sometimes happen on credit reports.
If you are following your report, you will see that a mistake has been made and can report it to the proper agency right away. Every negative mark on your score will set you back at this stage, so sign up for your monthly credit report to avoid these issues. Much like you should always check water quality using aYSI multiprobe system, you should check your credit score by receiving a report from the reporting agencies.
Take Your Time
Your credit score will not jump to excellent levels overnight, nor should you expect it to. All you can do after damaging your credit is to take the necessary steps toward gradually improving it and ensuring that it never happens again. Keep a budget and do not buy anything that you cannot afford with a credit card, as this is how many people get into trouble in the first place.
