Start Improving Your Credit Today

In today’s economic environment, credit scores are more important than ever in borrowing. Sub-prime loans are drying up and the ones that remain are getting more costly in both fees and interest rates. Most financial experts agree that the days of cheap credit are gone for the foreseeable future.

With this in mind, below are the immediate actions you can take to begin rebuilding your credit score. Obviously these steps are not always easily achieved but each action is another step towards a better credit score:

• Avoid any new derogatory actions. Each new delinquency, collection, or charge-off on your credit report will affect your credit score for years to come. Often the only way to compensate for these negative attributes is with time. Avoid these actions by limiting your spending or restructuring your debit. Restructuring may be difficult with a low score so it is best to avoid the debt in the first place.
• Don’t take on any new debt. Your debt load is a contributing factor of your credit score. The first step in eliminating debt is to stop accumulating new debt. This means having the will power to reduce spending on non-essential items. We understand this can be a very tough step, but it has long lasting affects on your credit score.
• Plan a budget to get out of debt. After reducing new debt, paying down your old debt is often easier. The best strategy is to make a budget and stick to it. Create a monthly budget of your income and expenses including a reasonable plan to pay down all your debt. As always, start with paying more towards the credit with the highest interest rate first.
• Build a good payment history with responsible credit usage. Credit cards are not evil if you are responsible and they can be a great convenience if you have restraint. If you don’t have any credit cards, apply for a credit card designed for people with poor credit. Often these cards will have high fees (this is a cost of having poor credit). With this new card, use it once or twice a month on essentials and pay it off in full each month. Demonstrate responsible credit usage and stop taking on more debt. These are some recommended credit cards for people with poor credit if you need help.
• If you don’t think you have the restraint to spend responsibly, then skip this step and stick to cash or debt cards.

Lastly, remember that building a good credit history can take a few years, but the benefits can save you hundreds of thousands of dollars in interest and fees in the long run. Each 50 point improvement will save you money and should be your milestone. Be patient and never lose hope!