Bad credit can happen very quickly and can have very serious, long term consequences. Banks and other financial lending institutions will often not approve loans or money borrowing requests to someone who has a record of poor financial habits.
Mortgages, auto loans, personal borrowing, or business capital can all be denied because of your high debt records. Having a bad credit rating does not mean you are sentenced to a life of financial blockades and lending denials. You can rebuild your credit rating and the trust between yourself and your financial companies.
Turning a poor ranking into a good one takes conscious effort, determination, and effective planning. To turn that score around, you must:
1. Pay Off Debt
Banks will never lend money to people who are already in a lot of debt. If you have outstanding credit card balances, loans, or owe money to other people or companies, it is important to pay it off as quickly as possible. Not only will you be living bill free, but you will also demonstrate that you are responsible with borrowed money.
2. Cut the Cards
Credit cards are a good way to build a strong credit ranking because they give you a history of spending and debt repayment. But too many credit cards can equal trouble. A lot of people have multiple credit cards. These not only add to the number of monthly bills you have, but they can very quickly increase your debt load.
Having one credit card with a low borrowing limit will help improve you score while keeping your borrowing to a minimum.
3. Save, Save, Save
Lenders give people with money loans, not people without. Financing agencies like to see what assets you have, including a financial nest egg. The more moola you have stashed away, the better your odds are of getting a loan because the businesses can see that you have residual income, or a means to pay them back. It also shows that you know how to manage your finances.
Saving funds is also beneficial for you. If an emergency happens, you can cover the unexpected expense without the worry of going further in the red.
Investing money into RRSP’s RESP’s Mutual Funds, stocks or bonds will increase your ranking because they are assets. Putting money aside shows that you are responsible and can for the future. Many investments grow over time, so you will earn more by putting your money into profitable investments.
5. Budget Your Spending
You should know how much money you are getting each month verses how much you need to pay out in bills. By reviewing your financial matters, you can find out how much you have in spending cash after all the responsibilities are covered. By creating and managing a realistic budget, you will avoid overspending and going in further trouble.
6. See a Financial Consultant
It can be challenging to learn to stay on a budget. Financial loss or downsizing, lack of knowledge in money matters, and unexpected emergencies or life changes can impact what you bring into your home and what goes out. A debt consolidation service can help you sift through all the confusion, so you can get a clearer picture of your funds managing style. A financial consultant can show you how to save, reduce costs, eliminate wasteful purchases, and pay loans off more quickly.
Bad credit does not have to be a life sentence. With planning and effort, you can turn that poor rating into a high credit score.