Rebuilding Bad Credit

Your credit score isn’t just a number. It is a measuring stick against which lenders, utility companies, landlords and other entities judge your ability to pay for the things you want. The lower your credit score, the more difficult it becomes to secure a loan and negotiate favorable interest rates. People suffering from poor credit scores often feel defeated. They assume “once a bad credit score, always a bad credit score”, which is a mistaken assumption, not to mention a dangerous one.

Bad credit can always get worse, and the bigger hole you dig for yourself, the harder it will be to climb back out. You should never give up or stop trying to rectify your credit problems. Most importantly, you should begin by checking your credit score once a year so that you know your current standing. By law, you are allowed to check your credit once a year from three different credit bureaus. This is a good way to ensure there have been no billing errors, that you don’t have an unpaid bills you’re unaware of, and that you are not a victim of any fraudulent identify theft activity. Even if you believe you have solid credit, it’s important to check your score because of these threats.

When it’s time to rebuild, you should focus on adopting better spending habits first and foremost. Spending is the root cause of all bad credit. Don’t charge things that you can’t afford, and never miss paying a bill by the due date. If you can, don’t just pay the minimum either; pay every bill in full. If you’re having trouble doing that, then you should take a closer look at what you’re buying and determine how you can trim spending the following month.

During the rebuilding period, try to get caught up on past due bills first, and do not take on too many new credit cards. It becomes challenging to manage multiple balances and payments, an added source of stress that you certainly don’t need during this time. By the same token, do not cancel too many cards at once. Canceling more than one major credit card in a given year can damage your score.

Finally, it may be wise to consider contacting creditors by phone or by letter in attempt to settle delinquent accounts. Some creditors may be willing to waive late penalties or spread an outstanding balance over a few payment periods. The bottom line with negotiating here is that it never hurts to ask!

While it’s definitely an uphill battle, you can definitely rebuild bad credit with the right outlook and a little bit of guidance. If you need additional support, please consider contacting us at McFarlin LLP.