Fixing your credit is not something you can do over night, but it is not an impossible mission. You can do this by yourself…you don’t need to hire a credit repair company to get the job done right. Like any large task you simply need to break it down into logical steps. By following our guide, hopefully, we can not only help you fix your credit but also keep your credit squeeky clean and remove some financial stress from your life.
Step 1. Check for Errors in Your Credit Report
Start by checking for errors in your credit report and dispute anything that does not look accurate. You can get a free copy of your checking report every 12 months at annualcreditreport.com. In addition, there are some free services that allow you to not only view your credit report but also give you your credit score. We recommend CreditKarma.com as they have some tools that allow disputing items on your credit report very easy.
Step 2. Change Spending Habits and Create a Budget
Situation A: Your Spending is Out of Control
Believe it or not, this is most people and they simply won’t admit it to themselves. They simply live beyond their means. New TVs and new phones. Nice cars and a nice home. All of which they simply cannot afford and have been slowly accruing debt for years till they are past that tipping point of being able to pay it back.
Solution: Create a Budget
Spending habits are like any other habits. There are good habits and bad habits. You just need to develop good spending habits, possibly downgrade your lifestyle a bit and follow a strict budget to help you get on top of your obligations. Check out our Guide to Good Credit and our Snowball Method for Paying Debts.
Situation B: You are Drowning in Debt
If your situation is the latter, then you really should consider working with a debt consolidation/relief company. You’re also probably going to need to find some extra income. A different job or/and an additional job are all on the table. These are major, life changing decisions here and should not be taken lightly. The bottom line is you simply cannot afford the basics with your current level of income. Until you solve that problem, you are simply applying another band aid to an already terrible situation. You are on the dreaded credit hamster wheel.
Solution: All Options are on the Table
As we briefly discussed above, you simply need more money. You cannot keep clothes on your back and a roof over your head, feed yourself and possibly your family and payback your debts. This is a tough situation, but it can be overcome. Your lifestyle may have to be drastically altered. You may need to work additional hours. Cut back on an already tightly controlled budget. Remember, a penny saved is a penny earned! You may need to settle some of your debts with creditors. Your credit is already ruined, so the goal here is to stop you from drowning. Do research, get creative, but do something about the situation TODAY. If you don’t take back control of your life, then the stress and possible depression caused by this situation will only get worse. BTW, taking out another loan IS NOT a solution here.
Step 3. Let’s Build that Credit!
OK, your back on your feet and making minimum payments to your creditors. That alone will build your credit if you give it enough time…but you want to move a bit quicker. A secured card is a great answer here. They work like this: You deposit an amount of money – say $500 and the card issuer gives you $500 worth of credit. You use the card just like any other credit card and make minimum monthly payments. Almost all secured cards report to major credit bureaus so that can be another feather in your cap.
Rome was not Built in a Day…
Your road to good credit is going to be a long one. It will take time, patience and a lot of extra work. You can get there! Remember, credit is not a necessity in this life. In fact, for an enormous amount of people, it’s one of the major contributors to stress, depression and anxiety. Avoid buying things on credit and you will avoid this situation altogether…and hopefully enjoy a happier more fulfilled life.