How to Repair Bad Credit – 8 Useful Tips
Before we begin this tutorial on How to Repair Bad Credit, you need to take a moment and back track your bad credit situation. Sometimes you may not know exactly how things got so bad, but the only thing you can do is try to pinpoint things that could have been done differently.
Many people fall into the bad credit trap due to uncontrollable circumstances like divorce, job loss, medical emergencies, etc. On the other hand, many people wind up with bad credit due to their own poor money management.
Whatever your case may be, this guide on How to Repair Bad Credit will provide you with some things that you can do to start improving your credit without delay.
1. Get A Free Copy of Your Credit Report
If you haven’t done so already, you need to get a copy of your credit report from the 3 major credit reporting agencies: Experian, Equifax and TransUnion. You may be eligible for a Free Copy of your Credit Report No Credit Card Required. Review everything from top to bottom to ensure all information is accurate. There could be negative items in your credit report that should not be there.
2. Dispute Errors
You have a legal right to dispute all errors and inaccurate information in your credit report. Credit reports are managed by humans so they are subject to error. Take a look at this study about Credit Report Accuracy and Access to Credit.
Also, being that identity theft has become a serious problem in this day and age, many people are finding that some items on their credit do not belong to them.
If you believe you have been a victim of identity theft or fraud, not only can you dispute these items — but we also strongly recommend that you file an identity theft/fraud report immediately. Instructions can be found in your credit report.
3. Rid Yourself of Unnecessary Bills
You need to play it tight – especially right now – and rid yourself of any and all expenditures that you do not absolutely need. By freeing up extra money, you can use this newly available cash to pay off your debts. Some things you might consider getting rid of at least for now are…
> Cable TV: With the rising cost of cable, this could save you a good $50 to $100 a month maybe more!
> Dining Out: Going out to eat frequently can get very expensive! By cutting down on this money-sucking habit, you could easily save an extra $30 or more per week – depending on how frequently you dine out.
> Burning Unnecessary Gas: With high fluctuating gas prices, cutting down on unnecessary driving could easily save you an extra $10 – $20+ a week. Consider carpooling or occasional public transportation and you can save even more.
These are just a few suggestions. You need to seriously review where your money has been going (every penny) in order to really generate the most savings.
4. Create a Strict Budget
Try Simple Money Management to make this task much easier.
Budget planning is vitally important step concerning how to repair bad credit. For starters, a simple way to develop a budget is: after you have eliminated of all your unnecessary expenditures, you need to make a list of all your remaining bills and other expenses.
You can simply write this a sheet of paper, type it, or create a spreadsheet. Record the amount and dates due and stick strictly to your budget. Do not spend outside of your budget except for absolute emergency purposes only. It’s for your own good.
5. Eliminate Debt
Pay down all your debts (especially high interest credit cards) by at least half. This will improve your debt to income ratio which is strategic step on How to Repair Bad Credit. We recommend that you make an aggressive effort to pay down debts with the highest interest first. Use the money that you’ve generated in Step 3 to speed up this process. You might also consider seeking the assistance of a debt elimination specialist.
6. Pay Bills in a Timely Manner
Make a good habit of paying all of your bills on time. Your credit is not only based on the amount of debt you owe, but also how responsible you are in paying your bills on time. (This is an area that lenders pay very close attention to.)
7. Do Not Create Any New Debt
When taking these steps on How to Repair Bad Credit, it is very important not to create new any debt. Afterall, you have enough debt on your plate already. Exceptions could be if you get a debt consolidation loan or other type loan that will save you more than what you’re already spending.
8. Consider Professional Assistance
Some credit situations are more serious than others, and may require expert assistance in order to restore your credit. If your situation falls into this category, it would be best to consult a professional about how to repair bad credit.