#6 Essential Finance Tips for People with Bad Credit

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6 Essential Finance Tips for People with Bad Credit

Bad credit is one of the more troubling financial situations you can face in modern society.

A bad score can potentially make it difficult or impossible to do even basic things, like rent an apartment. Yet, around 16% of Americans have credit scores that fall into the poor range.

If you’re stuck in that boat, keep reading for some key finance tips.

1. Build a Budget

The mere mention of the word budget is enough to send some people fleeing the room and cause eyes to glaze over. The word conjures images of a fun-free life where every dollar that comes in goes to pay some bill or lands in an untouchable savings account.

Yes, a budget should earmark money for things like bills and savings, but that’s not its real purpose. A budget forces you to figure out exactly where you are financially speaking. You must gather up all of your bills and recent pay stubs and see where your money goes.

That information arms you to make good decisions about your future money use. That includes setting aside a bit for sanity-preserving fun.

2. Get Your Bill Paying on Track

Credit bureaus calculate your score based on a bunch of factors. Your bill-paying history is one of the biggest. If you’re constantly late paying your bills, it shows up as a lower credit score.

Even worse, it’s stressful. Getting late payment notices in the mail or email serve as repeated reminders that your financial life is in some kind of peril.

Getting your bill payments on track will, slowly, improve your credit score. In the short term, though, it will remove stress from your life when those notices stop coming.

3. Pay Down Debt

Consumer debt, most often in the form of credit card debt, is one of the most insidious kinds of financial trouble. Credit cards often charge exorbitant interest rates, some in the 20 percent or more range. All of that interest you pay is money you can’t use on anything else.

Plus, carrying high balances on your credit cards negatively affects your debt-to-credit ratio. The worse that ratio becomes, the lower it drives your credit score. Paying down that debt not only reduces the interest you pay, but it boosts your score.

4. Ditch Unnecessary Subscriptions

Look at almost anyone’s bank or credit card statements and you’ll find recurring charges for subscriptions. For example, most people have subscriptions to at least one and often several video streaming services. Then, there are things like magazines or gym memberships.

None of these things are bad if you use them regularly. If you don’t, ditch the subscriptions. They’re bleeding your money for no benefit to you.

5. Save Up for Major Purchases

Everyone faces major purchases from time to time. For example, appliances die on people all the time. Yet, as often as not, you see these purchases coming down the pike. Sometimes, you just want a change, such as remodeling your bathroom.

Instead of taking out a loan, getting financing, or dropping those purchases onto a credit card, make a plan to save up cash for those purchases. Even if you don’t pay for it all out of pocket, paying for a big chunk of it out of pocket will spare your budget in terms of interest payments.

6. Don’t Lose Hope

For those with very bad credit, the situation can seem hopeless. What if your credit is poor, and you need a new vehicle now? The good news is that some companies will still work with you, such as bad credit car dealerships.

Taking positive steps will generate results in the long term. Your score will rise over time as you fix the problems that cause bad credit in the first place.

Bad Credit and You

Bad credit may feel like it’s forever, but it’s not. That can mean making some uncomfortable decisions, such as building a budget and sticking with it.

If you take those sometimes uncomfortable steps, though, you will see improvement in your credit score over time. Just as importantly, your life will probably become less stressful.

by Amy Sloane

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