If you’ve read our New Year’s Resolutions blog post, you know that fixing your finances and credit can have many benefits. You’ll be able to qualify for a mortgage or small bank loan, you won’t have to deal with pestering debt collectors, and you’ll feel better from the lack of anxiety. However, one thing that we must stress is that this will not be an overnight-fix. Rebuilding your credit takes time and should be handled accordingly. Taking a lesson from The Tortoise and the Hare: In the race to perfect credit, pacing yourself is important. Otherwise you’ll end up out of breath and overstressed just like the hare. Here are several things to keep in mind to help you reach the finish line:
Take It One Day at a Time: Every long journey begins with a single step, right? If you look at all of the steps involved with rebuilding your credit, it could become quite overwhelming. This is the reason why many people give up on resolutions. The important thing is to focus on single tasks, and these completed tasks will eventually lead to big results.
Get Your Credit Report: Ignoring your credit score and history will not do you any good. It’s best to face any issues head-on. This means going through your credit history to determine if there are any mistakes. A mistake on your credit report can incorrectly bring down your score. This is also the time to speak with creditors about setting up payment plans, waiving additional fees, etc. You’ll be surprised how easy it may be to negotiate your debt and payments down.
Focus on the Smallest Debt First: They call this the snowball effect and for good reason. By paying off your smallest debt first, you can build up momentum as you tackle the biggest debts later.
If You Don’t Have Credit, Get New Credit: This doesn’t mean you should apply for a bunch of new credit cards – remember what we said about approaching this like the tortoise. In order to build, or rebuild, your credit, though, you will need to establish a good history. If you don’t have any positive forms of credit, you should apply for safer forms of credit, like a secured credit card for bad credit offered by your bank. These types of cards generally have a higher acceptance rate. Make sure any card you apply for reports to the 3 major credit bureaus.
Rebuilding your credit will take time, but it will be worth it when you get there. Try these steady-but-proven measures to help you on the road to good credit.