Whether you’re recovering financially from a divorce or years of poor financial choices, bad credit is not the end of the world. Right now, your situation may seem hopeless, or it might feel as if you’ll never dig yourself out of the hole. However, like many negative things in life, bad credit is reversible. However, to improve your score, you need a game plan — the best way to approach the situation.
Here are three simple ways to get your credit in tip-top shape after a serious mishap.
#1. Compare secured credit cards
Some people aren’t a big fan of secured credit cards because they require a security deposit, typically a minimum of $250-$500. But while these credit cards require upfront cash, they are extremely beneficial, especially if you can’t qualify for other types of credit cards.
A secured credit card works just like any other type of credit card. Your security deposit acts as collateral, just in case you default. And since the bank issuing your card reports to the credit bureaus, paying your bills on time and keeping your debt low can gradually improve your credit over the next couple of years.
#2. Look into auto financing
Applying for a secured credit card isn’t the only way to rebuild a shaky credit history. If you’re also in the market for a new car, getting an auto loan specifically for people with bad credit can help boost your score.
Unfortunately, not every lender will approve your auto loan application. Therefore, you need to work with finance companies that offer financing to people with “past credit problems, low income or a limited credit history.” In this case, you can purchase your car from any dealership. But rather than apply for dealership financing, you’ll need to secure financing through a finance company that offers loans to people with your credit situation. And fortunately, there are several options available.
“The dealership writes the loan, but effectively, we’re the bank,” says Consumer Portfolio Services founder and chief executive Charles E Bradley.
Once you qualify for a loan, make your payment on time every month to improve your credit score.
#3. Continue making other payments
If you have other debt, such as a student loan or a mortgage loan, continuing to make these payments on time each month can also help your credit score.
You can’t undo the past, but if you make wise decisions going forward, you’ll add positive information to your credit report each month. Typically, it takes about 2 to 3 years to fully repair a bad credit score.
Improving your credit score takes patience and determination; however, you can reach your goal. And once you have a better credit score, you’ll qualify for better loan rates and credit card rates — and sometimes, a higher credit score results in cheaper insurance premiums and better job opportunities.
In addition to building your credit, you’ll need to check your credit report each year for accuracy. It only takes one serious mistake on your credit report to drive down your score.
