One of the most important things you can do for your finances is to build good credit. You may not think the credit system is fair, but it is a reality, and that means that you need to be prepared for it. However, what happens if you already have poor credit? What if you have made mistakes, or had an unfortunate happening? If you want to rebuild your credit, you will have to work hard and make some changes.
The Basics of Re-establishing Your Credit
First of all, it is important to get back to basics when you want to re-establish your credit. This means heading back to personal finance 101, living within your means and working to care of your obligations. The most important things you can do for your credit credit history are:
- Making on-time payments
- Paying down your debt
Now is a good time to re-do your budget so that you have enough money to meet your obligations and begin paying down your debt. You can make a debt repayment plan that will allow you to get rid of your debt as fast as possible. As your payment history improves and as your debt is paid down, you will start to see an improvement in your credit history.
If your credit has suffered due to an unexpected financial catastrophe, such as losing your job or enduring a medical problem, you can write a statement about the situation to be included with your credit report. It won’t help your credit score, but it might provide some context for those who look at your credit report.
Creating Situations to Help You Rebuild Credit
In many cases, you might have to create a situation that can help you prove yourself when it comes to managing money and rebuilding your credit. This means that you might want to get new credit — and behave responsibly. You might apply for a credit card, or get a small installment loan for some purpose. You will probably have to pay a higher rate of interest initially.
With a credit card, you might be forced to get a secured credit card. This can be a painful option, since many secured credit cards come with high fees and ridiculous interest rates. Make sure that you get a card that will report your good behaviors to a credit bureau — and that offers the chance to switch to being unsecured after you have proven yourself.
You can rebuild credit after suffering a setback. But it may take time, effort and patience before you see your good financial name recovered.