Life After Bad Credit: 3 Tips To Rebuild

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Bad credit does not have to spell the end of your financial dreams. All across America, millions of people are struggling to get back on track after being affected by a bad credit score.

 Over 30 percent of Americans have credit scores below 601- the distinguishing point for bad credit. Having a poor credit score can affect so many parts of your life. Yet approximately 11 percent of Americans are still unaware of the costs of bad credit.

Your credit score is one of the go-to factors that lenders and banks consider when you apply for any form of financing.

This means any loan or mortgages you may be looking to acquire in the future is affected by your credit score. Of course, this also means the interest rate charged is higher than it needs to be because you are viewed as higher risk.

This extends as far as to your car insurance.  Therefore it is essential that you get into the habit of routinely checking your credit score.

It is not enough just check your score but you also need to understand what contributes to an unhealthy credit score. If you are one of the many looking to repair your credit score, there are many ways to do so. Take a look at three of them.

 

#1 Pay on Time

It may seem like such a simple thing but it makes a sizeable difference to your credit score. Missing a payment date by even a few days can negatively impact your credit score.

Your payment history has the greatest impact, accounting for roughly 30-40 percent of your overall score. So, although you may be tempted to live with small late payment fees on your credit card debt, don’t be.

Pushing your credit card payments by even a few days not only affect your credit score but also drives up your interest rate. If you are late for over 60 days, your credit card issuer is allowed to impose a penalty rate which can apply for up to 6 months after imposition.

#2 Establish a Line of Credit

It may sound contrary to your purpose to go and take on more credit but this can improve your score drastically. The key lies in how you manage your line of credit.

There are many loans and credit cards designed out there specifically for those looking to rebuild their credit again. Most of them will come in the form of secured loans or credit.

#3 Keep Your Credit Utilization Rate Below 30

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Ideally, you want to keep your utilization rate below 30 percent of your credit limit. Your utilization rate refers to the amount of allocated credit you spend every month.

The lower your utilization rate is, the better your credit score will be. An easy solution to this is to only use your credit cards for small purchases each month.

These should be amounts you are certain of paying off each month. This satisfies two criteria at once; a low utilization rate and establishing a good payment history. These two factors combined can attribute to around 65 percent of your credit score.

Having bad credit can impair your access to financial products and hamper your progression in life. However, by taking these three simple steps, you can be on your way to rebuilding that all-important score.

What are you doing to fix your bad credit?  I used all of the tactics above to help me out but now I would like to hear from you.  Share your thoughts, comments, and stories below.

Cheers!

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