Personal credit is essential to build for several reasons. For starters, a good credit history will make it easier to get approved for a car loan, mortgage, personal loan, or credit card.
You will even get approved for a lower interest rate on your loans too.
The way you build your personal credit history is to pay your bills and debts on time.
When you do not pay your bills and debts on time, it can severely impact your credit history. The longer your bills go unpaid, the worse your credit will get.
Most people default on loans because they lose their job or have to contend with an unexpected financial emergency. Once they overcome that obstacle, they must deal with the aftermath of having a bad personal credit history.
Does this sound like your situation? If so, then do not feel too bad because you can overcome a bad personal credit history by following the right strategy.
Below are six tips on how to get started.
1. Get a Bad Credit Personal Loans
Did you know that there are loans for people with bad credit? These are loans where the status of your credit history does not matter. You can get approved for a bad credit loan regardless of how many missed payments you have had on loans in the past.
So, what is the catch? You will end up paying a much higher interest rate, or you will be required to put up some of your assets as collateral. Take the long term view as you build your credit history back up again by making your payments on time.
2. Get a Debt Consolidation Loan
A debt consolidation loan lets you pay off all your other outstanding bills and debts. Then you can focus on making one monthly payment to one creditor instead of several monthly payments to several different creditors.
This will make it much easier to manage your debt. You will also have fewer interest payments, which means you will be saving more money too.
3. Review Yourequest a Free Credit Report and CorrectLook for Errors
Sometimes an error on a credit report can be the cause of bad credit. If you paid off a debt account, but the creditor failed to close the account and report it to the main credit bureaus, then your credit will still be in bad shape.
To prevent this situation from happening, request a free credit report from all the main credit bureaus. Review each credit report for any errors or inconsistencies.
If you find any issues, report them to the credit bureaus. They will conduct an internal review to determine if your claims are valid.
When the credit bureaus agree with your claims, they will remove the errors and update your credit report with a better credit score.
4. Get a Lower Limit on Your Credit Cards
Making monthly payments on a credit card can significantly boost your credit history. Just make sure you do not have a significant limit on your credit card, especially if you have exhausted your spending limit.
Having a lower limit on your credit card would stop you from spending more than you have.
Also, try to make more significant monthly payments toward the balance. Do not just pay the minimum monthly payment.
5. Don’t Miss Any More Payments
This should go without saying. To restore your personal credit history, you must never miss another monthly payment ever again on any of your debts and bills.
Do not take out any more loans if you are financially strapped at the moment. Focus only on the loans you currently have and make the payments on them.
6. File for Bankruptcy
Bankruptcy is for emergency purposes only. If you have so much debt that you will likely never be able to pay it off, then you need to file for bankruptcy in a court of law.
Bankruptcy is a legal declaration to the court which states that you cannot pay your debts. The court will try to give you some relief from these debts.
Meanwhile, the creditors cannot garnish your wages or levy your bank account. However, you should only declare bankruptcy if you have no other option.
It can take anywhere from 5 to 7 years for your credit history to recover from a bankruptcy claim.
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