6 Ways to Take Better Control of Your Money

We would all love to get better control of our money, reduce our outgoings and increase our income. Without a plan of action, it’s easy to lose focus and see your finances go out of control.

How to Repair Your Credit

Living with poor credit can be tricky since your credit history moves with you everywhere you go and businesses use it to determine your creditworthiness. 

Living with poor credit can be tricky since your credit history moves with you everywhere you go and businesses use it to determine your creditworthiness. 

Low credit scores can cost you extra money in interest and insurance rates; it can also make finding a place to live a challenge and may even reduce your job prospects.

The good news is that living with bad credit is only temporary if you have patience and are willing to change some financial habits.

What you need to know about repairing your credit

Do it yourself or seek a professional?

A common misconception among those trying to repair and/or rebuild credit is that it requires professional help. Fixing your credit and raising your credit score can be done all without professional help.

Repairing and rebuilding credit starts with good financial habits

Coming back from a low credit score and poor credit history isn’t difficult. Your report and score change every 30-90 days, depending on how you manage your credit. And your credit score is determined by the information contained in your credit report.

Good financial habits like making on-time payments and reducing your debt, will eventually improve your credit score.

Credit repair takes time

Your credit report and score continues to change as you manage your credit accounts; developing positive financial habits can make positive changes to your score within a few short months. 

However, negative information like late payments will drop off your report after seven years, bankruptcies and foreclosures will drop off after 10 years. You can’t remove negative items on your credit report unless it is an error. 

The best course of action would be to wait for true negative reports to fall off your credit report while you concentrate on managing parts of your report you can control: making on-time payments, reducing debt, and staying away from opening new lines of credit.

Closing accounts can hurt your credit

It may seem obvious to close accounts you don’t use, but doing so will reduce your available credit and reduce the amount of credit you have available. It will also reduce the amount of your credit history. The best thing for you to do is pay off an account but leave it open on your report.

How to repair poor credit

1. Get a copy of your credit reports and dispute any errors

Get a copy of your report from all three major credit reporting bureaus (Experian, Equifax, Transunion). You can get one for free, once a year, from AnnualCreditReport.com.

Review each credit report for accuracy. If you find an error, request a correction by contacting the credit reporting bureau directly through their website, by writing a letter, or making a phone call. It shouldn’t cost you anything to dispute errors.

2. Know your credit score

Knowing your credit score helps you get an idea of where you are on the creditworthiness scale. Credit scores range from 300 to 850 or higher, depending on the agency reporting it. Any score below 580 is considered poor.  There are many free apps that help you track your score.

3. Pay off past-due amounts

Payment history has the most significant impact on your credit score. According to FICO, payment history makes up 35% of your FICO score.

Paying off past-due amounts before it goes to collections is your first priority. Contact the lender to see if it offers payment plans; your account may become a charge-off after it becomes 180 days past due. Charge-offs are negative account statuses that can stay on your report for seven years.

4. Pay down high account balances

Credit utilization, or the amount of debt you owe, makes up 30% of your FICO credit score. Using most of your available credit shows lenders you may be financially overextended. 

Pay down high account balances to raise your available credit limit.

5. Hold off from opening new credit - for now

If you’re trying to repair your credit by paying down debt, it’s probably a good idea to hold off on opening new lines of credit - at least for now. Opening new credit will reduce the length of your credit history (which makes up 15% of your FICO credit score) and can signify greater risk to lenders.

Also, hard-inquiries (something that happens when you apply for new credit) will negatively affect your score and remain on your report for at least two years.

6. Seek credit counseling if you need it

Credit counseling can help you get your financial life in order. Counselors can help you create a budget, recommend ways to prioritize debt repayments, and set up a debt-management plan.

Be aware that a credit counseling service is not the same as a credit repair service. Credit counseling teaches you better ways to manage finances, and a credit repair company disputes delinquencies with lenders and tries to work with debt collectors on your behalf.

However, legitimate credit repair services are hard to find and expensive. The FTC reports there are many credit repair scams consumers need to be aware of.

Final thoughts on how to manage your credit

Your credit report should improve within a few months after you start managing your credit in ways that positively affect your report. Keep making on-time payments, reduce your debt/credit ratio, and consistently monitor your report for errors. 

 

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