Bad credit doesn’t mean that you can no longer do the goals and plans. You must be patient with it though, because it will really take some time for you to be approved of a loan by creditors. The good news is that there are other ways for you to start your plans even with a bad credit history. Eventually, you can actually create a new line of credit just entirely for your business and leave your personal line out to avoid hurting it.
Follow These Recommendations
1. Get your credit report
The first thing you should do is get a copy of your credit report to know where you stand and to know whether there are items to fix on it. You are entitled to one free credit report every year from the three big credit agencies.
You can also order it by mail or through the phone. Get your free credit report from www.Annualcreditreport.com once a year, or get free credit score with your credit report at www.creditreport.com as credit score is the indicator of your financial credibility that lenders see. The site offers unlimited access to your 3 bureau credit reports and credit score monitoring, which will help you monitor your credit ratings while you work out to improve your bad credit history.
2. Check your credit score
Your credit score will fall within 300 to 850. The higher your score is, the more credible you are to banks or lenders. Your score will determine how credit-worthy you are to creditors because this is the basis of all your financial transactions. A low score may still get you a loan but the catch is, there will be a higher interest rate or a very high deposit. The line between good and bad credit score is around 600, anything lower than that will surely make things harder for you. However, there are these “microlenders” where they lend you a loan even with a score as low as 550.
3. Fix your credit report
Problems in your report should be removed or taken care of immediately. Doing a credit check is very beneficial to make sure you can finish off all your balances such as loans or credit card debt. If errors are your problem, you should file a dispute to your credit agency and notify them about the false items on your report. If you have receipts or any forms of proof, you can include it in your letter to back up your complaint. It may take 30 days before the agency remove the said items on your account. In order to start a healthy credit, you must start off with a clean slate. Working on improving your credit early on is a good idea if you are looking forward to applying for loans in the future.
4. Manage your finances
Rebuilding your credit will really take some time because it is quite a long process. Credit foundations want to find out if you are capable of managing your finances over a period of time. If you to start anew with your credit, you have to know about its limit and how much money you have in order to maintain it. If possible, create your own plan and list down your expenses to stay on track and to avoid going over your limit.
5. Pay your bills on time
Your bills are to be paid on time and regularly and this is actually the first thing you should always remember. Every time you make a late payment, it will show up in your credit report and will leave a picture of a “bad credit” which may last up to 7 years. That is why you should never exceed your bills and you have to make sure that you have your money standing by as soon as your bill arrives. Take note that a large part of your credit will rely entirely on your credit history.
6. Pay your Loans
Finishing of your loans may not get rid of bad marks on your credit but it may give your credit score a boost. Doing this regularly will get positive marks on your credit which may get creditors thinking that you have a good faith effort and that you are working hard on repairing you credit.
7. Maintain your debt to credit ration
Your debt to credit ratio is the next thing you should keep an eye out for. This is determined by the balance available in your credit. Make sure to keep your balance at least 30 percent below its limit or even less. If your cards limit is at a $1000, you have to try to keep your balance below $300. The higher the available amount there is on your card, the better it will affect your credit and vice versa. Having very little or no debt at all is something to be proud of rather than worrying how to pay your large bills and not establishing your credit. If you happen to be paying your bills regularly then here’s a tip to improve your score. By simply paying your bills a day or two before the deadline, your account will be given an additional 50 points because it will show a very small or even negative amount which will be reported to the credit scoring agencies.
8. Check on credit types
Different types of credit may intimidate you, but the truth is, it is actually a healthy addition to your credit. A person who only has one credit will get less than someone who has a credit card and a loan.
9. Stay in budget
Creating a budget will not only rid you of debt, but it can also improve your score and keep your away from debts as well. Creating a budget may sound easy but sticking to it is the challenging part. Pay more attention to your credit and you’ll see results in no time.
These are just some of the things you can do to startup with a bad credit history. This may be an awful thing to have but it is common and it is not the end of the world. Just be patient and your credit will return all the effort that you have put into it.
Saurav sharma is a financial blogger and love to share interesting financial stuff on the web. He is very enthusiastic to acquire and to share the knowledge about finance , business strategy, credit score etc.