Bad Credit Score Improvement Tips

I’d be willing to bet the average credit score has taken a nosedive since the beginning of the recession.  After all, less income means more borrowing for most households. Luckily, there are several simple ways to improve a bad credit score and become fiscally fit once more, or for the first time as the case may be.  A bad credit score could mean the difference between getting  a loan and getting hung out to dry, or at least a few percentage points on your interest rate.

Survey The Damage

Unfortunately, most people with a bad credit score just don’t know what to do in order to improve it.  Sure, everybody knows the generic advice spouted on every personal finance radio show in the country, but here are some specifics to get you started:

1. Identify monies owed and to whom they are owed - Don’t leave anything out.  Get a copy of your credit report to help with this (you are entitled to one free annual credit report from each of the three major credit reporting bureaus).
2. Ask for a rate reduction or partial debt forgiveness – From a lender’s perspective, any amount they can get out of you is probably better than they could expect otherwise.  Most customers in the worst shape are basically written off as a lost cause, so even partial payment is a boon for them.  You’ll never know until you ask.
3. Negotiating a payment plan with these lenders - Do this whether you can get a reduced rate or not.  If your loan term is 5 years, so if they’d be willing to extend it to 8 years to ease the monthly burden.  Most will be more than willing to cooperate if it means keeping you out of bankruptcy court.
4. Pay off all debts owed according to the payment plans – Many people think there is a magic button you can press to get rid of all your debt without paying it.  There isn’t (well, perhaps filing bankruptcy qualifies).

Open New Lines Of Credit Modestly If At All

What do you do when you find yourself at the bottom of a deep hole?  Stop digging!  The first order of business is to stop making the same old mistakes.

Make A Budget

Face it, chances are you’re in this boat because you spent more than you should (medical emergencies and the like are obviously exceptions to this).  A time-tested method of keeping spending under control is creating a budget.  Nothing improves a bad credit score faster than paying your bills in full on time and paying down existing debt.  A solid budget makes both these tasks monumentally easier.

Improving your credit is not a short-term thing:  it is a long-term process.  Don’t expect results overnight and most importantly, don’t give up!