If you’re recently discovered that you have bad credit, you’ll need to find ways to fix it. You may also need to find ways to raise funds for short-term expenses. Fortunately, there are some things you can do.
1. Avoid Payday Loans
If you’re in need of quick cash, you can find bad credit loans online or at some banks and credit unions. These loans do have higher interest rates than regular loans, but it’s still possible to pay them off if you’re working on improving your credit. Avoid payday loans because they can have interest rates of 300% or higher, which makes it impossible to pay off any debt or rebuild your credit.
2. Get New Credit Accounts
You may be shy about being burned by credit cards, but they’re a good way to rebuild your credit if you’re responsible. People with bad credit should start with secured credit cards, which let you deposit money with the issuer and have a limit that matches that amount. If you keep your payments on time, then the bank may lift limits on the card and return your security deposit. When that’s done, you can look at getting more traditional credit cards. Don’t get too many, however, since too many hard inquiries on your credit can lead to damage.
3. Improve Your Habits
This includes things like buying new clothes you can’t afford, making just the bare minimum on your payments, or skipping payments altogether. You should also stay well below your credit limit and create a monthly budget to fix your spending habits. Such a budget will help you understand where your money’s going and reduce the need for credit cards.
4. Pay Your Debts
Your payment history and amount of debt makes up a combined 65% of your credit score and credit report. Although the snowball method, which means paying down smaller debts first, is a morale booster, experts recommend the opposite. The avalanche method of paying higher debts down first reduces the interest you pay and looks better on your credit report. If you can’t pay your whole credit card debt down in one or two payments, then hold up on using your cards while you pay your debt down. You should also be sure to pay on time every time. Even a few days late can look bad on your credit report.
5. Ask for Help
You can ask for help from trusted friends or relatives who know that you’re earnestly trying to improve your situation. If you’re looking at a loan, you could ask someone you trust to be a co-signer, which can help both of you as long as the payments are met. You could also become an authorized user on someone else’s credit card as long as you’re sure about your payments.
Reclaiming your credit may seem like a daunting task, but it’s quite achievable as long as you follow these rules. You’ll be back to financial sustainability in no time.