Top 5 Bad Credit Solutions

There are 5 common ways to fix your bad credit. Although some people may not be aware of them, these methods are nothing new and have been around for quite some time. The following is a list of the top 5 ways to fix your bad credit:

  1. Make Payments on Time
  2. Increase available credit
  3. Choose 1 credit card to focus on.
  4. Pick 1 thing you can live without.
  5. Stop using credit.

Why you should make credit card payments on time

There are many lenders (car, mortgage, and credit card companies) who access your credit history before making a financial decision on your behalf. One category that always gets a good look is your payment history, because it shows the lender how responsible you are in making your payments and making them on time. The good thing is that if you’ve missed a payment here and there, it’s not a big deal, but if you’re missing payments a few cycles in a row, that’s not good. It’s like when you’re at a job interview and they call your last employer and find out you were pretty late. On the other hand, if you were late for work once every 2 months, it won’t be mentioned. Same principal for making payments on time with your credit cards.

Also, when you miss a payment, you become subject to some problems with the credit card companies. First, your credit card will charge you a late payment fee and, in some cases, you may be charged a penalty interest rate. As if your life isn’t hard enough already, there’s obviously a lot going on if you’ve missed a payment. Then they add salt to the wound with this punishment. You are also subject to universal default where other credit cards can legally penalize you for missing a payment on a completely different card. This is not the scenario of making a bad choice and only the witnesses find out, everyone finds out.

Why you need to increase your available credit

Your goal is to get out of debt and fix your credit score. You can start working toward this by increasing your available credit. The amount of credit available is what causes so many people to have bad credit scores. They have literally used more than 70% of their available credit (for example, your credit limit is $2,000 and you have $200 available). This hurts your score a lot because it shows lenders and/or credit card companies that you don’t have enough cash and that you need to be confident in using your credit card. So if you pay off your balance and increase your available credit, it sends a different message to credit card companies. Eventually, your available credit increases in 2 ways: when you pay off the balance, and companies will generally extend your line of credit while you pay off the balance, and based on how long you’ve had the line of credit.

Why you need to choose 1 credit card to focus

It happens all the time, people get motivated and do drastic things that are not useful in the long run. For example, you commit to losing weight and exercise for 2 hours the first 2 days, but by day #3 you’re sore and exhausted, so you stop exercising. This happens with the payment of credit cards. People get extra money and instead of paying 1 card, they make payments on 3 credit cards. Although they reduce the balance of all of them at the end of the day, they still have 3 credit cards instead of the 2 they would have by concentrating on 1 card at a time.

Why do you need to pick 1 thing you can give live without

Getting out of debt is about sacrifices and not wasting money. Some people have to keep up with the latest trends and take on even more debt. I did too and then I got hit by the iPhone 6s plus. I was shopping for new iPhone after new iPhone and then realized that I don’t have 1 iPhone that isn’t in mint condition. Everyone can play the same games, display the same apps, etc. so I’m wasting money buying a new iPhone every release. I will not buy the iPhone 7!

Another example is coffee, I learned that kcups are not cheap, they are fast and convenient. I also learned that $2.50 for a venti at Starbucks everyday is $14.00 and a 32 oz bag of Starbucks Dark Roast is 17.00 in BJs. Before I learned about BJ’s I was paying 2.50 but I thought I was doing fine because I was using my cash back debit card. However, the Bjs bag is much cheaper.

Why you should stop using credit cards

I massively increased my credit score (FICO score) a few years ago simply by not using my credit cards for a few months. I recently blogged about it because it was around this time a few years ago that I noticed a huge increase in my credit score, I had finally joined the 700 club! Also, the interest on credit cards, even if it’s low, is ridiculous. In my state we complain all the time about taxes on products, well, credit card rates are a little higher than taxes. Lastly, if you don’t pay balances in full by the end of promotional periods, your balance almost doubles.

Bonus #6 Hire a credit repair agency

Here’s a bonus: The number 6 way to fix bad credit is to hire a credit repair agency. By law, you are entitled to a free consultation from credit repair agencies. According to the Federal Trade Commission (FTC), the Credit Repair Organizations Act requires that consumers of credit repair services receive a copy of their legal rights and protects customers from being charged before they services are performed. The resources on this page will elaborate in more detail about this law.

In closing, using the methods listed above will certainly help improve anyone’s credit score. Making credit card payments on time, increasing available credit, choosing a credit card to focus on, choosing one thing you can live without, and not using credit cards are the most commonly used ways to fix bad credit. When in doubt, contact a credit repair agency and make sure you understand the terms you’re agreeing to.

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