Once I heard someone saying “credit score are for people who aren’t a home owner yet”. Buy home and stop worrying about credit score. Well imagine what happened if you lose job before paying off debt and you are out of your sweet home.
Be careful, financial disaster can strike anytime, credit history and credit score are your ingredients to weather this storm. Even when you are going through financial trouble, you can build better score, just don’t lose heart and have faith in you.
Improving credit while you are financially sound is easier but ,during hardship its really hard to improve your credit score.
1. Check your credit report
In case you don’t know, you are actually entitled to one free credit report every year. You can get it from Trans Union, Experian, and Equifax. These are our U.S. credit bureaus. Have yours printed and delivered into your doorstep.
There are plenty of reasons why you need to do this. First the document gives you an overall picture of your financial health. Are there loans you haven’t paid faithfully yet? Second, errors in credit report can have a profound impact on your score. Just imagine, a loan you’ve already paid off is still listed there as unpaid. That’s going to be disastrous. It takes a while before the bureaus can correct such mistakes since they need to perform their own investigation, so the sooner you can catch them, the better.
2. Pay your bills on time
I couldn’t stress this enough. Don’t wait for a couple of days or next week or worse next month before you settle them. Even if you pay the amount within the grace period, it sends a very wrong message to the creditor: you’re having trouble paying the bill or you’re an irresponsible debtor.
Perhaps you have several bills to think about. If you’re struggling with this, you can do something I did. I automated them, especially my credit card bills. Once they are due, they are allowed to collect the amount from my authorized bank account. This way, I don’t have to always remember my dues. Since almost all banks now allow online banking, I can just check the debited account no matter where I am.
3. Talk to your creditor
Once in a while you find yourself in hard times, and your finances are enough for other important bills. If you really cannot pay your debt right now, make sure you can talk to your creditor about it. Of course, you can’t expect them to be happy or cancel your debt, but a lot of them are open-minded enough to give you a grace period with perhaps a small amount of penalty or none at all. They will appreciate your honesty and commitment to pay off your debt.
4. Don’t go for the minimum
If you have the funds to pay off all your credit card debt for the last month, then do so. Don’t settle for the minimum. Keep in mind that whatever balance is left for the month is carried over to the next and is charged the same interest rate. So if it gets carried over many times, it’s also charged several times. Before you know it, it becomes a lot harder to end your credit card debt.
|Try to reduce your credit exposure within 30% of your overall credit limit. If you have a credit limit of $10,000 don’t charge your card for more than $3,000. I had made a call to my card issuers every 6 months to increase credit limit gradually. And now within 6 years of being in this country and starting with a secured credit card, I now have a combined credit limit of $45,000 across 4 cards I carry. My monthly expenditure is not even $1,500 which I charge on credit cards in entirety to earn rewards.|
5. Don’t save yet
I already mentioned this in my previous article about coping with financial failures. If you have a pile of debt staring at your face, saving money for the future is illogical and impractical. Consider paying all your debts first, before you increase your saving cushion.
6. Ask help from the experts
I always stress the importance of having allies with you, particularly if it’s about financial health. Get rid of the notion they’re just after your money. I have seen many who are so dedicated in what they do; they simply want to help you. You can even just buy a good book and read and follow the tips, if you’re too shy to talk to someone.
7. Consider other methods of paying debts
Financial counselors can present you a couple of ideas so you’ll be able to pay more debts in just a short time. One, you can mortgage refinance so you can take advantage of a much lower interest rate and longer payment terms. You can also consider debt consolidation, combining all your debts and pay only a few obligations later. Some would even tell you to set up garage sales and sell stuff you don’t need. We once helped a friend do this, and for only a few days, his funds could cover two mortgage payments.
A bad credit score may be harmful, but that doesn’t mean it’s something you can’t fix. Just remember the tips above, and hopefully, things will be better real soon.
Aaron Hung says
What if you save a little bit just for emergencies? like car need a alternator replacement or speeding ticket? 😀
Good point. Emergency cash should be the top most priority. But I had written it on the purpose of increasing credit score with an assumption that reader has his emergency cash.
Newlyweds on a Budget says
This reminds me, I need to check my credit score again!
please do 🙂
[email protected] says
Very good tips, especially about checking your credit report for errors. I read that about 78% of all credit reports in the US have errors. So it’s pretty likely there is at least one error on your report.
I am lucky to be among the 22% never found an error. knock on the woods 🙂
Good Cents Savings says
Great point about talking to an expert – I think I’ve had it in my head that I need a big portfolio for it to make sense to talk to someone, but it’s probably smarter to get someone’s advice now on how to build that portfolio over time.
Also – shocked to hear people would stop caring about their credit score once they own a home. What if they want to buy a new house down the road? Or rates drop and they want to refi?
in deed its heard to believe that. Thanks for your comment.
Sukhvindar singh says
I had no idea my credit was bad. The guys at Credit Sudhaar analysed my report. The process took some time but my credit was restored, enhanced and protected. I have no reason for complaints.
Raj Kumar says
My application was rejected. Credit Sudhaar was my choice. Initially they were slow. But their counsellors were able to handle all my queries. I will give Credit Sudhaar a positive review.