Surviving life with a bad credit score

Debt has lots of negative connotations, but actually, some debt is very beneficial. If you want to study or buy a house, for example, chances are you will need to borrow money to be able to do so and to be able to do this you need a good credit score.

However, if you’ve already dabbled with things like loans, store cards and credit cards you might have messed up your score to the point where it’s an issue borrowing for the things you really need. If you want to sort your finances out and put yourself on the path for a better financial future, here are some of the ways you can go about it.

Cut up your cards

If you’re already behind with payments and getting behind with money, your first step should be to cut up your cards so you can no longer spend on them. That way every time you make a payment you are reducing the balance and not simply spending back on it. If you’re very far behind and struggling to make minimum payments, it’s worth speaking to a debt management company.

These can speak to your creditors and work to have reduced payments and interest frozen. The overall aim is to pay down your balances and close your credit accounts until you’re in a better position with your finances.

Work on rebuilding your score

Just because you have bad credit now doesn’t mean it has to be that way forever. If you regain control of your finances now, in six years your adverse credit will drop off your file and in the meantime, you can work on building positive credit. Start by setting a budget, this will help you stay in control of your cash and prevent overspending and getting into trouble with money. You need to know exactly what you have coming in, what goes out and on what dates. Use a notepad, calendar or budgeting app – whatever suits you best.

Look at ways you could be making cutbacks and where your money could be best spent. Instead of buying a coffee every day from a coffee shop, could you buy a thermal flask and take your own to work? Instead of buying big brands every time you buy groceries could you go with a less expensive product?

Once you have control of your money, you could apply for credit designed for those with a less than perfect scores such as collateral loans or credit cards.

You will need to then be very careful and ensure you’re paying it back on time every month, this should be solely for the purpose of building credit and not because you need or want to spend the money. The interest on these kinds of loans will be higher so it’s important to go about it the right way. After a year or two of regular, on-time payments your credit score will be looking far healthier.

Learn from your mistakes

Many of us will get into debt in life at one time or another. If you’ve managed to do so, don’t be ashamed, simply use what you have learned to not let it happen again.

If you want to rebuild your score, you will need to re-open lines of credit at some point and so learning from your past mistake, know what you need to do differently this time. Don’t get carried away with borrowing and over commit yourself.

Don’t miss payments, and if things start to go wrong rework your budget so you can cover everything.