Fixing Bad Credit

Good credit is directly proportional to financial options. A good credit score is necessary to secure a home loan with a low-interest rate, to obtain a loan to purchase an automobile or other big ticket item and to obtain a credit card with a decent interest rate.  It is necessary to be financially responsible in order to maintain a good credit score. Prompt payments and positive discharge of loans will help keep credit scores in good condition. It does not take much to damage good credit, but there are steps that can be taken to repair or rebuild credit.

Everyone should always know what their credit score is but if the consumer does not and has been turned down for a credit card or loan, find out your credit score immediately. There are a number of ways to determine your credit score. The big three credit companies will tell the consumer their score. The lending agent who denied your loan application should tell the consumer the reason your application was declined and why. The “why” will include your credit score if it was for that reason?

Establish a new bank account, even if you already have an account. A new bank account will give your financial picture a new start. Believe it or not, a bank will check your credit before allowing a bank account to be opened. If the bank denies a standard bank account to be open, they will most likely allow a bank account designed for those with bad credit. It does not have a credit card option, no cheque book and no draft overlay facility.  The account will have a debit/cashpoint card. Deposit your pay into this account and use it responsibly. The bank will report to the credit companies on a monthly basis, whether the account is being run responsibly. A good report each month will begin and continue chipping away at the bad score. After a year of responsible banking, the bank will allow an upgrade to a cheque book account and within another year or two, you will be offered overdraft and credit card option.

By this time, your credit should have received a boost in credit score. This is a good time to take out a small personal loan. Even if it is only for a thousand dollars, timely repayment will allow them a lot of good check marks and good check marks lead to a better credit score. If you do not have a credit card, apply for one. Charge a purchase or two every year and pay the balance in full each time you use it. This will not only give you more good check marks, but if the credit card has interest free days, it could also save you money.

Once you have established a solid repayment reputation, take out a loan for a big ticket item such as an automobile. At this point, your credit should be repaired to the point it will accommodate such a purpose. Make sure the payments are on time every time. This will probably take anywhere from 3 to 5 years to complete, but once your credit is back to A-1, take steps to keep it that way.