There are many different types of bad credit history, but the two most common are that you know you have bad credit and you could care less and don’t want to do anything about it. While in this day and age where a decent credit score can do more than effect just your ability to get a decent rate on a loan or mortgage, or even disqualify you for landing that new job and paying higher rates on your car insurance, that perspective is difficult to understand, but that is your right and you are entitled to feel that way if you want to.
The more common type of bad credit history comes from consumers who know they have bad credit but really want to do something about it. The good news is that the ability to do something about it is within their grasp, and they only need to take action to get on the path to having that corrected.
The first thing you need to do is to understand where your money is going. Yes I am going to use the “B” word – Budget. You cannot just deposit your paycheck and then pay bills until you run out of checks because you are going to be paying horrendous fees in bounce charges from your bank. This is not good and will further reduce your credit score, as well as being illegal, so you first need to understand how much money you have coming in, what your bills are that you need to pay every month, and then figure out how much is left for food clothing, entertainment, etc.
Truth be told, if you are not willing to take this first very fundamental and elementary step, then it only follows that you are not really serious about changing your bad credit history. Changing that so you can get a good credit score is a process, and step one of that process is putting yourself on a budget that you will follow religiously. It’s really not hard and think of how good you will feel at the end of the month when you have followed your budget and all your bills are paid that month.
The next step is to get a copy of your credit report from the three major credit bureaus and go over them with a fine tooth comb. The majority of consumers have errors in their credit reports. These errors do not correct themselves over time, but are only corrected if you dispute it. So your credit history may not be as bad as your credit score indicates, since if you have errors that are dragging down your credit score, it may be calculated as lower than it really should be.
The next thing you need to do is pay your bills on time, all of them, every one of them, on time with at least the minimum payment. If you have a lot of credit card debt, make extra payments and pay more than the minimum on the ones that charge the highest interest rate because that high interest is just money going down the tubes.
If you can establish a good payment history on your accounts, it is actually to the benefit of your credit score to keep those accounts open. Remember, this is a credit history, and to have history, you need a length of time to establish that history. Keep those accounts open if you can. If you cannot afford to pay them off, keep your balance to about 25% of your credit limit, which shows you are using credit responsibly.
You can change your bad credit history if you put some effort into it. It’s not going to happen overnight, but if you never start, you’ll never get there.