Did you know that roughly 30% of Americans have poor or bad credit? If you make up part of this 30%, you shouldn’t feel alone or ashamed. Although poor credit can make it tough to qualify for an apartment, get approved for a credit card or land a low-interest rate on a car loan, bad credit can be temporary if you take steps to become more financially stable. You may be surprised by how easy it is to dig yourself out of a bad credit situation. With a plan, self-control, discipline and patience, your credit score can start to look as good as new.
How to Have Better Credit in 6 Steps
1. Establish and maintain a budget.
Keeping up with the latest and greatest fashion and technology can be tempting, but it can also be exhausting, for you and your bank account. Fixing your credit score starts with fixing your spending habits. You can begin by implementing a budget and doing whatever it takes to stick to it. Focus first on meeting your everyday needs, like housing costs, utility bills, groceries and weather-appropriate clothing. Also, setting a budget will make you feel more in control of your money, and you’ll be proud of yourself for sticking to your plan each month.
2. Make payments on your credit cards (and stash them away).
Credit card purchases can add up quickly. As you work on sticking to your budget, avoid putting any new costs on your credit cards. Instead, focus on paying off the balances. You can do this in multiple ways, like paying off the debt with the highest interest rate first, then working your way down to the debt with the lowest interest rate. You could also work on paying off the debt with the smallest balance first, then working your way up to the debt with the highest balance.
No matter which method you choose to start paying off your credit cards, remember that you still need to make payments on all of your debts on time. Also, avoid opening any new credit card accounts while working on your credit score and work on clearing debts from your existing credit cards instead.
3. Pay your bills.
According to FICO, the largest credit score provider in the country, your payment history makes up 35% of your credit score. Paying your loan payments, credit card bills or any other payments even a few days late can affect your credit score. You can establish a solid credit score early on by paying your bills on time, which is an excellent way to start off on the right financial foot.
4. Make an appointment with a credit counselor.
A credit counselor can work with you to review your finances and help you come up with solutions for your credit problems. From credit card debt to housing expenses to money management, making an appointment with a credit counselor is a great way to help you repair your credit score, especially if you aren’t sure where to start.
5. Keep up with your credit score.
Find out what your credit score is and what the number means for you. Credit scores typically range from a low of 300 to a high of 850. You may not know what your credit score is currently, so get a free check online from your bank or credit card company, or look up other financial companies that offer free credit checks.
6. Ask for help.
Fixing your credit shouldn’t make you feel alone, and you don’t have to tackle bad credit by yourself. Find a support system by working with a company that helps consumers build or rebuild their credit.
