Bad credit decisions do not define your credit score for the rest of your life. There are many ways to overcome your past mistakes. However, the sooner you can turn your credit around, the better. Here are three of the most common bad credit decisions that people make and how you can overcome and repair your credit after making them.
1. Racking up too much credit card debt.
Credit card debt can seem overwhelming and unmanageable. It’s probably got you wishing you could go back in time and rip those credit cards away from younger you, or feeling like there’s no way out and you’re stuck in a swamp of debt for the rest of your life. Your credit has already been affected, since 30% of your credit score is based on your credit utilization (the percent of your credit limit that has been used up).
Overcoming this past mistake is difficult, but it can be done. In order to be really serious about eliminating your credit card debt, you’ll need to be strict with yourself and completely change your spending habits. You need to completely stop using your credit cards. Do whatever you need to do to completely eliminate your credit card spending.
Then, cut out unnecessary expenses from your budget so that you can put more money towards your credit card payments. Take on extra work, find side jobs, do whatever you need to do in order to pay off your cards. If you have multiple cards, then pay off the card with the higher APR first.
2. Not making payments on time.
35% of your credit score is based on your history and ability to make on-time payments to your creditors. If you have a history of missing payments or making late payments, then it’s likely that your credit score has severely suffered and new creditors are not going to want to loan you money. If you’ve had payments go to collections, then you may have marks that will stay on your credit report for years.
You can’t go back in time, but you can make a commitment to make all payments on time in the future. Set a calendar alert or reminder on your phone or computer. Set up text/email alerts with your lenders. Set up auto-payments so that you never miss a payment. Over time, your credit report will show that you’ve turned around and are able to make your payments on time.
3. Biting off more debt than you can chew.
Your debt-to-income ratio is another factor in your credit score and your ability to get approved for new credit accounts. Over the years, you’ve applied for – and received – home loans, car loans, student loans, credit cards, store credit cards, and more. You are so in debt, you have no idea how to start paying it off. Stop applying for new lines of credit. Focus on paying off accounts with the highest APR first. Live well beneath your means until you get a steady hand on your debt.
You’re not the only one who has made bad credit decisions. The good news is that many people have been able to overcome the ones they have made. Take these steps to start living a more financially savvy life today. And if your credit score is still relatively fair, get emailed our best credit card offers. You very well may be able to transfer your account balance to a card with a better APR.
