Dealing with Bad Credit
People who are dealing with bad credit pay more for many things, such as;
credit cards, mortgages, insurance, car loans, cell phone contracts.
With bad credit you will also pay fees and deposits others do not pay such as a yearly fee to maintain a credit card account.
One of the first things one must do is to change how they look at money and how they handle it.
Thinking hard on how the situation occurred in the first place is a good way to start the healing process.
Then figuring out the attitude toward money that created the problem and turned it into a nightmare.
Two things that will dramatically change the situation is making sure your bills are paid on time and reducing the debt you have (which will also simplify your life incredibly!!)
Thoughts about changing your attitude towards money :
When you are dealing with bad credit many experts advise to cut up all your credit cards but one.
Good advise as the stopping of the use of credit till the problem is under control is needed, but this many times is not the full scope of the problem. Many use credit for impulse shopping (which is the leading reason many small shops offer credit in the first place) and some rely on their credit cards for emergencies.
If you are in this group of individuals who impulse shop or use credit for everyday spending then your attitude must change if you want to avoid heading for trouble!!
Many experts say that a credit card should only come out for emergencies. WELL when I used credit cards often, I seemed to always have an emergency!!!! Maybe my idea of an emergency was distorted OR my financial situation made more situations an emergency than actually were. FOOD FOR THOUGHT!!
What I found was that working on savings so you have the cash for an emergency is the better option. That first time you handle an emergency with cash is an OH SO GOOD FEELING!!
Maybe you can hold on to that one card until the savings is at a comfortable level and then get rid of that final card. OR that final card could be looked at as the ONE card to use after your credit repair is mostly finished and under control.
Ideas for taking control
If you are not in control of your impulses then most likely a strict budget and a self imposed new plan of self discipline will be in order (along with help from family and friends).
- Let others know you need help to keep yourself on track.
- Don't go shopping alone and take others with you that are committed to helping you keep your goals.
- Stop shopping sprees.
- Commit yourself to shopping only for absolute necessities.
Using a budget, when you are dealing with bad credit is crucial. You can plan all necessary expenses and if your budget allows, work in some money for occasional splurges . They are necessary once in a while!!
If you have a real dilemma and find yourself in short supply of extra cash after budgeting in necessities, then using the date after a credit card is paid off, is the time to reward yourself. You will deserve it!!! BUT don't let it go unchecked.
If balances are out of control and availability of usable credit on accounts is low this will lower a credit score. Remember you are shooting for using only 30% or less of the available credit on any account for the best scoring possibilities.
If there are other accounts that are not being used moving some of that balance around will create a better credit mix.
It will also guard against an older valuable account being closed for inactivity by the lender. Length of credit history is another valuable scoring area you don't want to lose.
Not only will you lose the history but the available credit that was on the account. An overall available credit reduction will lower your score as your debt vs available credit will be raised.
Examples; making dealing with bad credit better
Card #1: 5000.00 credit limit balance of 3000.00
Card #2: 3000.00 credit limit balance of 1000.00
Card #3 2000.00 credit limit balance of $0.
overall credit: $10,000.00 use: 4000.00
usage should be at 30%: not overall, but for each card
Card #1: is well over the 30% should be at 1500.00
card #2: is where it should be. Best to continue to reduce that balance
card #3: needs to be used. Taking 1500.00 from card #1 to transfer to that card is the best option here. Taking in and carefully scrutinizing rates to transfer.
If card #3 were closed then overall credit would reduce to 8000.00 with 50% being used and a fairly aggressive payment plan would be needed to correct this for optimal results.
If there is no room in your overall available credit to balance out the debt load or transferring isn't agreeable, then adding credit is another possible choice.
A better safer option, though would be to develop a relationship with a bank and gain their confidence enough to get approved for a consolidation loan.
This way there will be no credit inquiry which can lower your score for a bit (working backwards!!). Worse yet you could be denied, and still have the inquiry. AND if your problem is controlling the debt, then you don't need another credit card when you are already dealing with bad credit.
The loan adds to the credit mix which is only a 10% credit score calculating item but again will perk that 30% area of unsecured debt extended to you versus the amount used.
Other bad credit helpful tips
If you have been neglectful toward your credit report and the information contained in it, that very may well could be the bulk of your problems. When you are dealing with bad credit the situation may not be truly as dire as your score reflects.
Once upon a time an occasional glance at your credit report may have been all was needed.
In these times work habits by many in the credit reporting industry as well as credit departments of lenders are not as conscientious as once were and many wrong and inaccurate information could be recorded.
Just the cleaning up of that area could raise your score all you need to qualify for a much better rate.
If you have recently applied for new credit and were denied the letter stating so will give you clues on the most important areas to put attention to as that denial letter will state what led to the denial usually in order of importance if there is more than one reason.
Another area of concern in dealing with bad credit
Maybe you haven't even got going with your credit and through mishandling of money you have made your chances at getting even a checking or savings account difficult. Whatever led to this problem of course should be corrected and cleaned up. You may have the difficulty of having been placed on the chexsystem.
That is a combined effort among financial institutions to share information about those that have mishandled their checking or savings accounts so other institutions will be able to make an informed decision whether to extend a new account with these individuals. Once you have made this list you will stay on it for 5 years.
When you are dealing with bad credit even in this dire light the situation may look impossible but remember there will always be SOMEONE who will approve you for whatever account you may be looking for, but for you it will cost more and have more restrictions and hoops to jump through.
You will also most likely spend more time finding these that accommodate your circumstances, but they do exist.
Choose carefully! Make sure what you choose works toward something better for yourself.
There are banks that do not use the chexsystems, but they will most likely want a monthly fee for this privilege.
Another option in bad credit help are the new line of prepaid credit cards. Prepaid cards were much like gift cards that are loaded and then used wherever and whenever needed.
Now they are designed like a checking account. They can be used over and over and continuously reloaded and have the ability to link a direct deposit to it.
You can use an online bill pay just like a checking account. Again carefully check the fine print as you will most likely have monthly or in some cases a per use fee.
Many claim that these help build your credit, so it's worth looking into and possibly a good option if you are declined at the regular bank of your choice.
What ever the case may be in your dealing with bad credit, know this... you have options and with careful planning ( you will need to be careful as many will try to take advantage of you) you can make the situation better!
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