After the whole economic collapse in 2008, many people are now being affected by the credit crunch. Perhaps their finances were a little tight in the past and they simply couldn’t make the minimum payment on one of their debts (this could be a credit card, the car payment, or even a phone bill). As you know, any missed payment affects your credit score negatively, and it could have affected it just enough to give you a “bad credit score”.
What Do I Mean By Bad Credit Score?
If you take a quick look online, you’ll quickly realize that a credit score above 700 is considered “good”. If you’re on time with your payments and steer clear of your maximum credit limit, then this really shouldn’t be much of a challenge to attain. However, as we mentioned before, if you make a few mistakes, your credit could slip below this 700 level, and might even dive down into what many consider to be a “bad credit score”.
If your score is below 660, I would call this bad. Once you get below this number, things start getting difficult. You might be denied for credit cards, interest on your future loans tend to skyrocket, and you certainly won’t be cleared for a large mortgage like you once were.
How To Battle Back From Bad Credit
If you are struggling with bad credit currently, there are a few things you can do to battle back and be affected less by this credit crunch.
1) Use Cash
It really is as simple as that. If you use cash, there’s no need for credit. Pay cash for your appliances, your furniture, your electronics, your cars, and perhaps even your house! I know I know, you think I’m crazy, but, it really can be done. If you can’t afford to buy new things with cash, turn your search to Craigslist or your neighborhood garage sale. You can often find items that are nearly brand new at only a fraction of the price of new.
2) Reduce Your Spending
As I stated in #1, do your best to buy things with cash, but even beyond that, it may be time to take some more drastic measures to get your budget under control. If your house mortgage is currently $2,200 a month and your family is only bringing in $2,500, I would suggest selling that dead weight property in a hurry.
Sure, you may be under water on it, but it would be much easier to pay cheap rent (in the apartment where you’ll be moving to) and a small payment on the remainder of your outstanding loan, than that large mortgage payment that you’re going to keep missing. Be smart and do whatever it takes to get your bills under control.
3) Use Credit
While I am a proponent of debt freedom, I do not live under a rock. I realize that credit is used for more than purchasing outlandish, unnecessary items. Credit is also used for judging your character! When you submit your resume for a job that suits you perfectly, your paper might soon end up in the trash because of your low credit score. Employers often believe that if you have low credit, you must not be paying your bills, and you’re therefore a bad person.
In order to build up your credit again, it might be wise to get a secured credit card or take a look at small loans for bad credit. Of course I would suggest that you spend only manageable amounts of money on credit (you don’t want to get back into the same mess that you just got out of), but with careful planning and a little bit of time, your credit will rise back up to that “good” category.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.