If you have been struggling with bad credit and looking for ways to repairing bad credit, the following tips on bad credit repair would help you.
Do not panic
Panic will make the situation only worse. Take solace in the fact that you are not alone. There are millions of people who are in similar situation as you. The only way out of such a bad credit situation is through it. And it will take time, discipline and lot of patience… but if you play well you are sure to find a way out and again be on track to meet your financial goals.
Check your spending habits
If you already have debts piling up and if you are not able to reduce the balance on your credit cards or keep up with the loan payments, then it is surely time to check your spending habits. You must immediately stop spending on anything that you want but don’t really need (differentiate between “need” and “want”). Just stick to buying the basics that you need for a decent survival… leave the rest to a later time when your financial situation improves.
Do not max your credit cards
Ensure that you do not pile up the balance on one credit card. If you use most of the credit limit available to you on a credit card (while you have no balance on other credit cards), you will end up destroying your credit score. So, instead of using one card heavily and not using others… you should actually be using all your credit cards lightly (a good way is to limit your spending on any card to around 25-30% of its credit limit).
Here it is also important to mention that even if you have a good history on one of your credit cards, it would not be given much weight in calculating your credit score if you have not been using it actively. So, just spend a bit on these cards so that you can capitalize on your discipline on these credit cards.
Do not seek more credit
While the suggestion is to use multiple credit cards, it doesn’t mean that you should apply for more credit cards. Asking for more credit will have a negative effect on your credit scores as it would mean that your financial health is not good enough (and that’s why you are seeking more credit).
Clear balances on your credit cards
Paying off balances on your credit cards can have a big impact and help bad credit repair. In fact, paying off credit cards would help in repairing bad credit even more than paying off the installment loans. Moreover, since the credit card debts are high interest debts, it (paying off credit cards) would help reduce the rate at which your debt grows. So, pay off credit cards even if it means selling some of your assets. If you have more than one credit card then you might opt to pay off the ones that are closer to their credit limit.
Do not consolidate the balances on to a single credit card
This is a mistake that a lot of people make i.e. they just go ahead and consolidate the balances on various credit cards onto one credit card. And few people make an even bigger mistake of consolidating the balances from higher limit credit cards to lower limit credit cards. It is important to note here that though it might seem convenient to consolidate the balances (and it has its own benefits), it might not be good for your credit score… always remember the golden rule that the percentage of credit limit used by you is an important criterion affecting your credit score.
Do not get your credit limits lowered
For the same reason (the golden rule) as stated in the point above, if you get your credit limits lowered then the percentage of credit limit used by you would increase even for the same balance. So, don’t get your credit limits lowered.