Saturday, May 18, 2024

What to Do When You Have Bad Credit

What to Do When You Have Bad Credit

Even just a few bad financial decisions can have a lasting impact on your credit score. You might find it much harder to secure traditional funding, and even your ability to obtain rental properties can be affected. Having bad credit can impact your life in some frustrating ways. However, you might be surprised by how straightforward it can be to improve your situation.

Try Alternative Funding Options

If your poor credit score is stopping you from securing funding for something important, you might think you don’t have any options. You’ll simply have to wait until your credit score has improved. However, bad credit loans can be an alternative funding option worth exploring.

Bad credit loans, also known as car title loans, let you use your vehicle as collateral to secure a loan. Most car title loan providers won’t consider a borrower’s credit score when deciding whether to offer lending. Instead, they get their security from knowing they have your car title.

Dispute Errors

Having a less-than-desirable credit score isn’t always entirely your fault. For example, a company might have reported that you paid your bills late, but you have proof that you paid on time. Credit bureaus can launch an investigation to find out more information. If you’re correct, the error can be removed, and your credit score might improve.

Pay Your Bills On Time

Something as simple and easy as paying your bills on time might be more helpful for improving your credit score than you think. Payment history makes up 35% of your credit score, so late payments can be detrimental.

If you’re forgetful or disorganized, create a process that will help you pay on time. For example, you might set up automatic payments for regular utility bills or set a reminder on your phone. If you struggle with meeting your recurring payment obligations, pay the minimum to avoid late fees.

Don’t Close Old Credit Cards

Paying off your credit card bill can be a great reason to celebrate. You might choose to mark this momentous occasion by cutting up your card and canceling it so you don’t use it again. However, closing old credit cards can sometimes be more harmful than helpful.

The longer your credit history is, the healthier your score might be. In fact, credit history can make up 15% of your credit score. If you’ve had your credit card for several years, consider keeping it open.

Avoid New Credit Inquiries

When you desperately need funds for something important, it can be tempting to apply for new credit with multiple companies. You can then see who gets back to you the quickest and proceed with the loan application process.

However, multiple new credit inquiries, known as hard inquiries, can negatively affect your credit score. Lenders may then be less inclined to provide funding in the future. Hard inquiries have more of an impact than soft inquiries. If you, your employer, or your own financial institution check your credit, these actions are unlikely to have any impact on your score.

If you have bad credit, it’s easy to feel like your entire personal and professional financial future is restricted. However, that might not be the case. Take some of these actions above, and you might enjoy more financial freedom than you thought possible.


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