The economy hit many well-intentioned borrowers hard. They wanted to pay back their loans, but they may have only made enough money to pay their important utility bills and mortgage. As a result, they knowingly and regrettably hurt their credit score.
With the economy slightly improving, it may be possible to start rebuilding your credit, but where do you start? What can you do right now to quickly improve your credit? Here are some things you should start doing to help build your credit back up.
Don’t trap yourself
If you don’t make enough money to pay your bills and loans at the same time, choose to pay your bills. Having electricity, groceries and a place to live is much more important than that credit card bill. Take care of your priorities first.
You can try to contact your creditors to see if they will negotiate a payment arrangement with you. Most creditors are willing to work with their borrowers’ situation. However, make sure that any agreement made is considered paid as agreed. That is the only way to satisfy the three major credit bureaus.
Assess which debts to pay first
The easiest way to clean up your debt is to go through a list of creditors you owe. If you owed a debt to a bank or lending company that has gone out of business or merged with another business, check to see if your debt still exists. Companies that cannot verify a debt are forced to remove the account from their servers.
After assessing that, start paying any credit card debts you owe. Credit bureaus are fast to give scores to people who pay their credit cards off. You may feel like you should pay off your student loans or other installment debts, but they don’t help your credit score as much as a paid off credit card.
If you are searching for a new job, you may want to explain your current debts and the reason for your bad credit. Most employers disqualify candidates with poor credit. You can do this by going to each of the three major credit bureaus, Equifax, Experian and TransUnion, and leaving a note about why you have experienced poor credit with them.
Leaving a statement on these sites won’t help your score and won’t help persuade lenders, but it may help your chance at landing that job.
Bad credit will hurt your chances at attaining loans and credit cards, but you may apply for a secured card. These cards require collateral, usually a deposit of $300, but they will help you rebuild your credit score, especially if you use it and pay it frequently.
However, make sure the company you attain a secured card from reports to the major credit bureaus. Otherwise, it will do nothing for your score.
Rebuilding your credit may be tough at first. You will certainly have to convince lenders that you are in a stable financial state, which will require you to prove your income and process paperwork. Nevertheless, it is a vital step toward securing a brighter future.