Your credit rating can have a significant effect on your life. In addition to being able to obtain credit cards, your credit rating can determine whether you are able to buy a home or purchase a car. Even if you are not denied a loan due to a poor credit rating, you may not be able to afford a purchase due to a high interest rate.
The good news is that there is a lot that you can do to improve your credit rating. Even people who have filed for bankruptcy are able to make significant improvements in their credit score within two years of filing. Simply bringing your accounts up to date can greatly increase your credit rating even if you haven’t paid off all of what you owe.
Know Where You Stand
The first thing you should do when looking to repair a bad credit rating is to know how much you owe, who you owe and what income you can apply to paying off your debts. Therefore, you should obtain a credit report to see which creditors are stating that you owe them money.
Along with helping to give you a complete picture of your debt, obtaining a credit report can also allow you to verify that your credit score is accurate. Credit reporting agencies may have outdated or incorrect information about what you owe, and disputing inaccuracies on your credit report is a quick and easy way to help boost your score.
Assess Your Finances
Once you’ve got a list of what you owe, you should look at your income, expenses and financial habits. From there, you will need to create a complete list of all expenses you have, and it will need to include everything from utilities and rent to living expenses, such as gas and food. From there, you can subtract your expenses from your income to figure out how much money you have to put towards paying off creditors.
While going over your finances, you should also take a look at your spending habits and determine what you can do to increase the amount of money you have available to pay off your debt. There are a number of small changes you can make to your lifestyle that can allow you to get out of debt and improve your credit rating much faster, including reducing what you pay for cable and Internet and dining out less.
It’s also important to determine if your spending habits aren’t what got you into trouble in the first place and won’t keep causing you to struggle. If you find that you’re living paycheck to paycheck even though you have a solid income, you’re probably going to need to make changes to the way that you handle your money.
Get Help From Professionals
If you feel that you’re in over your head or would like some ways to potentially reduce your total debt, you may want to seek assistance from organizations that help people rebuild their credit. These services can do a variety of things to help you improve your credit rating.
In addition to helping you create a workable repayment plan, credit counseling services may be able to assist you in obtaining lower interest rates, having fees waived and making deals that allow you to pay less than you owe. Some services will even allow you to make regular payments to them that are then distributed to your creditors. This can help take some of the pressure off of you while ensuring that your credit is being repaired.
It’s important to note that not all credit counseling agencies are on the level. While some can be key in getting a person’s credit rating repaired, others take advantage of people and do little more than take their money. Be sure to look into any agency that you are considering getting assistance from, and don’t be afraid to ask questions about how your credit rating will be improved and how long it will take.