For many people, the idea of suffering from bad credit is a tough one. Well, it’s certainly not as preferable as living with great credit and lenders lining up at your door to offer you loans. But that’s not necessarily the best thing in the world anyway, and if you have poor credit, it serves as an opportunity to relearn the financial basics and great habits.
The great thing about your credit score is that it’s malleable, and can grow in time. Depending on where you live, credit scores tend to rebalance themselves after around seven years anyway, provided you take care of the most important debts.
But how can you live with bad credit? Is it possible, and what accommodations can you make in order to avoid making it worse? In this post, we’ll discuss a few efforts that make your daily living a little easier, as well as tips for improving your credit over time. This, coupled with your own intuition and insight, may help you be rid of this problem as time passes:
Understand Your Exact Credit Faults
It’s important to take a thorough look at your credit report and make arrangements to resolve some of the issues weighing it down. There are many free credit rating services out there, but it’s important to find those that actually make a difference. Some may charge a light fee to access your main report, and often those aggregate services are the most thorough. Checking from month to month can help you understand how your credit report changes, why that matters, and advice for improving it.
For instance, it might be that you have a couple of debts, but one isn’t listed on your credit file as of the moment. Keeping up with the minimum payments on that one, while making sure that another listed on your report is prioritized could be a good way to go about things, provided you have an agreement with that creditor ahead of time. Provided you balance this well, you may be able to find an agreed-upon solution that benefits both parties.
Consider Contract-Free Phone Plans
Contract-free phone plans can help you avoid the affordability and credit checks that come with finding a contracted phone, which you may be denied in the first place. Now that minutes, texts and data are more affordable than ever, you may be able to get onto a very cheap plan that can be updated at any time, without the need for recurring monthly costs.
Of course, this may mean that you need to purchase an unlocked phone, but with second-hand handsets available constantly, you don’t need to pay for a brand new option here. This way, you can retain some of the usual conveniences without having to tie yourself up into further spending.
Focus On Individual Landlords
While it’s true that bad credit can preclude your ability to rent with certain letting agents, you may have more success with individual landlords. Just make sure that they conform to all of the standard principles of renting to you, such as placing your deposit in a protected scheme. Check for their reviews and testimonials. Make sure you keep all correspondence in writing, and don’t think that bad credit means you have to pay an abundance of hidden fees in order to qualify for the property. Bad credit is a financial rating, not a legal position that deters you from the rights and obligations that everyone else enjoys.
Pay More Up Front
With some considerations, paying more up front can help you get around being denied for certain financial obligations based on your credit. For instance, making sure you pay more up front, such as giving a bigger deposit in a mortgage designed for bad credit, can make a big difference.
This may take a little more time to save up for, but it will help you with further affordability as you move forward. Don’t be afraid to take your time as far as this is concerned, over the long haul managing your finances and negotiating appropriately while in bad credit can become something you get used to – but not something you have to keep up with indefinitely as the proper management of your finances and paying your creditors on time will increase your credit score as time goes on.
Consider Cosigners
Cosigners can make a massive difference in providing you finance or getting you into a new rented apartment situation. A family member who may be willing to act as a guarantor can serve as a great way to back up your financial situation should you need it. Now, it’s important to make sure that you can actually afford the finance or renting arrangement that you’re hoping to opt for, as it can deeply damage ties with the person willing to act as a guarantor.
That said, this is a worthwhile measure that many people use in order to give themselves that leg up, particularly people who have a limited credit history to begin with. If you can plan that appropriately, then you may be in with a chance of finding somewhere nicer to stay.
Build Up Your Credit
This might sound like oversimplified advice to someone with bad credit, of course. But when you have dealt with your debts and managed to develop regular income, then building up your credit is key.
Taking out a credit card suited to people with bad credit, making essential purchases and then immediately repaying them over time can give you a better understanding of how your credit operates over time, and as the months pass, will show that you are a responsible person to lend to. That, in effect, is what your credit rating is based on, and so it’s worth keeping that as an essential measure in mind. Getting into great habits is a good idea. Of course, if you’d much rather avoid any kind of credit arrangement for a time, then that is perfectly acceptable too.
Consider Debt Charities
If necessary, debt charities can be a great place to consolidate your debts, to make sure that creditors are negotiated with on your behalf, and that you are given a financial plan that actually makes sense moving forward. For some people, this can be the step up that people need in order to start managing their finances properly, with a fresh start that helps them begin anew.
Debt charities can also offer free, impartial advice, and not just necessarily because of you being in debt. They are financial resources, often subsidized, to help people out of financial dire straights but to also ensure that the best advice is out there, that people are less likely to fall into default or go bankrupt, which is never healthy. Don’t be afraid to leverage that information.
Limit Any Overdrafts
It’s a worthwhile use of your time to limit any overdrafts or additional spending requirements you have. If you’re absolutely sure you don’t need a particular credit card or lender, just throw away letters or offers you may receive during this time. Try to limit any additional desire to spend in this regard, or route for added cash. This can help you avoid problems that may chase you for some time.
Consider Capable Lenders
Of course, capable lenders can help you should you need them. Loans for bad credit online do exist, especially if you’re in a stable financial situation and your only problem is getting your score back up. This can be used for any purpose, just like the purpose that someone with good credit might have for taking out of a loan.
What matters is making sure that these lenders are responsible and that you ensure your forecasted affordability is okay with taking on such a loan. If you can do that, you’ll be in the best possible position going forward.
To summarize, let’s consider some of the following advice. Understanding your exact credit faults, using contract-free phone plans, focusing on individual landlords, considering the use of debt charities, considering cosigners, building up your credit rating, limiting overdrafts and then selecting capable, responsible lenders should you need them is a worthwhile use of your time.
If you can achieve that, then, in the long run, you’re so much more likely to make worthwhile progress that the bad credit you’ve temporarily considered as a detriment will be resolved and you will have learned techniques to move on from there.
One thing to remember is that bad credit is not the end of the world. It may mean to need to prove your trustworthiness as a lender again and make healthier, more long-term financial decisions, but it won’t mean that your finances are forever doomed. As mentioned above, credit scores tend to recover if there’s nothing weighing them down. The more you’re aware of your obligations, the better you’ll do.
With this advice, you’re certain to live comfortably and with better financial planning, even if bad credit is a temporary status you need to deal with.