Posted on August - 26 - 2011
Ways to Improve a Bad Credit History
A bad credit history can have a serious and negative impact on your life. It can affect your ability to secure credit when you need it. It can affect rates and credit limits even if you do get approved. It can cost you your dream job, and it can affect your ability to rent.
That doesn’t mean things are hopeless if you have bad credit right now. Let’s look at a few things you can do to improve a bad credit history and fix your financial situation.
1. Find and fix errors in your credit file.
The first thing you should do if you suspect problems in your credit file is to check it. Get a copy of your credit file from both Veda Advantage and Dun & Bradstreet. Not only does this let you document actual credit problems you need to work on, but it also helps you find and fix errors that can make you look bad even if you did nothing wrong.
2. Close unused accounts if you don’t need them to decrease available credit.
Having too much available credit already can make you look like a bigger credit risk to potential lenders. So don’t apply for new credit if you already have a lot of unused credit available to you. If you just forgot about an old credit line or card, close it out before applying for one with better terms, like a balance transfer credit card.
3. Make sure all payments are up to date.
Double-check your payment history for all of your regular bills. Are you behind on anything? If so, get it paid up to date right away. Current late payments makes you look like a very irresponsible borrower — not someone banks want to issue credit cards or loans to. Better yet, do this and then wait a few months before applying for new credit. Show lenders that you’ve been able to stay on track with payments for a while. It makes you look more reliable.
4. Pay more than the minimum due each month.
You might think you’re a good borrower just because you make your minimum monthly payments each month. But lenders don’t always see it that way. Pay more than that minimum. It minimises your total debt, stops it from increasing too quickly due to interest payments, and saves you money as well.
5. Stop applying for new credit until all problems have been dealt with.
If you know you have bad credit, do not apply for more. Work on repairing your credit history as much as possible first. Not only do you risk being rejected, but those applications alone can hurt your credit history even more. That’s because each enquiry from an application stays in your credit file for five years. If you apply for several credit cards and get rejected because you didn’t deal with credit problems, it makes you look desperate to secure financing. And that makes you look even worse in the eyes of lenders.
Many consumers face problems with bad credit for a variety from reasons — from poor financial choices to unexpected catastrophes like divorce or medical bills. So don’t be too ashamed of it. Instead turn your attention to fixing your credit history. There’s a lot you can do, starting today, to improve your credit down the road. What are you waiting for?
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