How to Repair Bad Credit Ratings

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How to Repair Bad Credit Ratings, Many people unwittingly get bad credit ratings and then land up paying even more money.

If you have a bad credit rating, you can get into a worse financial hole and your credit cards, which have become a lifeline for many people can even be stopped. Worse, if you apply for any kind of loan whether it is for a house, mortgage, education or whatever, you may not be approved or you may have to pay a much higher rate of interest.

Check out your credit ratings

Even if you are financially responsible, and not in debt, you should be aware of your credit ratings. There are three credit bureaus in the US that keep a check on your credit ratings. These are Experian, Equifax and Trans Union. They will go through your credit balances, check when you have made payments and whether you have been late, how much penalties you have to pay, what is the outstanding you have on your cards.

How to Repair Bad Credit Ratings
How to Repair Bad Credit Ratings

You can often get a combined credit score from them. If you have a high score, there are greater chances of your being approved for loans and at a cheaper rate of interest. If you have low scores, you may not get approved or may get approved at a higher rate of interest. Scores below a certain level will not get loans or credit at all.

Beware of unscrupulous loan companies that can offer you tempting lines of credit at usurious terms of interest. You can get into a bigger financial hole with them. Or they tell you to take another social security number and opt for a fresh line of credit which is a criminal offence.

How to repair bad credit ratings

Yes, you can repair bad credit ratings. You can do this by clearing all your outstanding bills with credit card companies. If you are unable to do so, you can ask for debt negotiation or debt consolidation, and even negotiate with the companies for a lower interest rate and/or penalties.

If you can come to a settlement, this works in the interest of both parities because taking recourse to legal means is expensive and sometimes counter productive.

Erasing credit card debt

Make a total of how much you owe on all your credit cards, including the basic money owed and the interest, penalties, arrears that have accrued. Then see how much is the interest the credit card company is charging you for all the money owed.

Sometimes, it may be possible to get a bank loan or a loan from a financial institution at a cheaper rate of interest and pay off all your credit card debt. Perhaps you can ask a friend or relative to co-sign for such a loan. This way you can get rid of your credit card debt and get good credit ratings. But you have to make sure that your have the wherewithal to make the payments on the loan.

What next?

Once you have paid off your credit card debt, you have to make sure that you do not fall into the trap again. It becomes imperative to limit your use of the credit card. You can do this by:

  • Using the card to make only small payments
  • Using the card to make payments for particular items only
  • Putting a limit on your monthly credit card expenditure
  • Reducing impulse buys
  • Keep your credit cards at home or carry one only for identification purposes or emergencies
  • If you just cannot stop yourself from using a credit card, then opt for cash or a debit card instead.

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