Bad credit and the best ways to fix it

I vacillate when it comes to bad credit. I’ve never really checked, but I assume my credit is appalling considering I have never been able to pay it off by the end of the month and have since cut the damn thing up.

At 22, I have no idea what affect that will have on my life from now on but I’m going to concentrate on paying off the credit card before I start worrying about my rating. I’d much prefer to have no debt and a damaged rating, than a great rating and ten thousand dollars in consumer debt yet to pay off.

That may be the worst advice in the world, I honestly don’t know. I don’t prescribe it to anyone else, I’m just saying what works for me. A debt-free existence is a large goal of mine, so I’m not likely to use a car loan. When I eventually want to buy a house, I plan to have a large chunk of the deposit ready to go. But, should I want to repair my damaged standing with credit, what steps should I take? Here’s where Finance Tips 101 comes in to save me.

Month by month

First step, get a handle on your expenses. You’re going to get nowhere if you still can’t pay off your monthly bills on time. Put a calendar up on your wall, and enter the dates you need to pay your bills by.

Paying off your bills in time will help you in many ways. First, you won’t have any awkward defaults to explain away. Secondly, you won’t have any horrible late fees or overdraw charges that dig you further into the debt ditch than before.

Pay your minimum

Getting out of debt is going to require you to pay off your credit card at a rate above the minimum, but paying that off on time is where you need to start. Your credit rating suffers every time you forget to pay off the monthly minimum.

Once you’ve gotten into the habit of paying your monthly minimum on time, you can start paying over and above.

Keep to the limit

Your score will improve once your debt is less than 30% of the limit. Racking up huge amounts on your credit card, whether or not your pay it off in full every month, is likely to not look great on your credit score so consider using cash as much as humanely possible. A life lived on credit is not a good end goal.

Use one card

Having millions of cards is a stupid decision, financially and in terms of your credit score. The older the card, the longer your credit history will be and the more stable you will look. Improve your credit rating by consolidating all your cards, and paying the debt down. People will tell you it’s bad for your credit rating to cut the card up and cancel it.

All I know is that I sleep a lot better at night knowing I can’t be tempted by that little piece of plastic. It works for me, I’m not saying it would work for other people. The most important thing is keeping debt repayments to below 25% of your income, and getting a peaceful 8 hours a night. However you manage that is your decision.

How do you keep your credit score looking peachy?

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