Not many years ago, I thought all credit was bad and loans were for the impatient. I believed it was more reasonable to wait until I could afford things rather than take out a mortgage or car loan, or even get a credit card. Then, when I finished college, it dawned on me that as an English teacher, the only house I would be able to purchase without credit would be a fall-on-your-hip friendly rambler fifty years into the future. At bank after bank, I was told that having no credit was the same as having bad credit. I was too risky. I needed to find out how to repair bad credit.
Having bad credit – or no credit – can make life miserable. It will hinder your ability to get a loan for a car or home, insurance of any kind (yes, insurance companies look at your credit score), or living quarters – as even landlords look at credit scores. What is a good credit score, you ask? If you have a score of 720 and up, you are doing well and 690 and below will make things tough. The difference between great credit and bad credit can mean as much as 4.2% on a 30 year fixed mortgage. With bad credit, you would pay an extra $439 a month and roughly $158,000 all told. As you can see, the price of bad credit is severe.
Simple Credit Repair Tips
Fixing bad credit doesn’t happen overnight, so relax. Making rash decisions or trying a miracle, easy-fix program will probably result in more financial woes. There are legions of sharks that prey on people who want to repair bad credit. There is good help out there, but if you’re not willing to put in the time researching what a service has to offer, and how exactly they will fix your bad credit, don’t bother. The Better Business Bureau is a great place to start. If the business has accreditation, there is a good chance they are a legitimate choice to help repair bad credit.
Before you can repair bad credit, you need to take a good long look at your credit report. Many sites on the Web will offer free trials to see your report, and some have some good credit management products that go along with membership, but remember that you have the legal right to see your credit report every twelve months. Many sites promise free 3 in 1 credit reports, but annualcreditreport.com comes with no strings attached. 
Now that you have your credit report, work to repair all the entries that lowered your credit score. Some entries, like outstanding debts, will simply take time and discipline, but it is also important to look for errors and inconsistencies in your credit report. The process of coming up with a credit score is ripe with chances of human error and fraud (identity theft). If you find problems, you can call any of the consumer credit companies, but, because of the long, frustrating automated-voice service, I would recommend contacting them through their respective websites.
Now it’s time to change the behaviors that have led to your bad credit. Sit down and make a monthly budget, and when you do, make sure it is down to the penny. Downshift unnecessary spending, from the small things like going out to eat and entertainment, to the large things, which may mean changing your living arrangement or even liquidating certain unnecessary possessions. It may seem hard, but would you rather watch movies on your new HD TV, or repair your bad credit? Look to pay off your higher-interest debts first, as this will be cheaper in the long run and repair your bad credit in a shorter amount of time.
Lastly, I would recommend getting a financial advisor to help you fix your bad credit. If you have really low credit score, it is probably because you were never taught how to manage money. Look for an advisor from a trusted institution (search the Better Business Bureau and look for references). A trustworthy financial advisor can help you make a budget, reduce your debt, and steer you away from the predatory lenders and fraudulent businesses that seek out people in trouble. They may recommend different refinancing options, debt consolidation (also known as bad credit loans) or a number of different options. Remember, any advisor worth his/her salt will recommend shopping around for the lowest interest rates, even if that means going through a bank other than the one he/she works for. Repair Bad Credit by Knowing How you Got It
The mathematics used to generate your credit score is private property, but it’s generally understood how it is made. Payment History 35%: Lenders are concerned with how you pay your bills – if you pay on time or are consistently late, and if so, how late and if collections had to get involved. Available and Outstanding Credit 30%: Outstanding debt will impact your score negatively. Generally, they look for how much debt you have compared to the amount of credit at your disposal. Use credit, but keep your balances low. Length of Credit History 15%: Your score goes up if you’ve proven, time after time, that you can handle credit. New Credit 10%: Opening up many new accounts quickly – especially if you’ve had a troubled past - can be seen as desperate, foreclosure-leave-the-country behavior; however, rate shopping for better deals won’t affect your credit score. Absolutely do rate shop! Types of Credit 10%: Having a variety of credit experiences, such as retail credit, credit cards, mortgage loans, and finance company loans, leads to higher scores.
