Bad Credit Resource Center

This tip probably won’t help you improve your credit but it will at least keep it from falling. Get overdraft protection, insurance on your credit cards, or other protective services to maintain your credit rating.

Talk to your bank and lenders about services they offer to keep financial incidents from affecting your credit. Overdraft protection, for example, is a basic service that often costs nothing or very little extra but which protects you in case you withdraw too much money from your bank account. 

With overdraft protection, you do not get a “ding” on your credit report or a charge for insufficient funds.  In most cases, you get a day or two to add more money to the account to cover the deficiency.  Some credit cards and other loans offer a similar service or offer insurance which protects you in case you lose your job or get disabled and are unable to pay for a few months. 

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When it comes to financial emergencies we all tend to stick our head in the sand. Few of us think about what would happen if we lost our jobs or suddenly became too ill to work.  The thought is simply too terrible to think about for most people, especially if we’re living paycheck to paycheck. 

Financial emergencies happen to almost everyone at some point in life and they can have devastating impact on your credit. In fact, most people who declare bankruptcy do so because of a huge financial disaster such as sudden unemployment, huge medical bills, a lawsuit, or divorce.

 Despite this, few people plan for these problems, even though they can happen to anyone. 

If you want to keep your credit score in good shape, you should have a plan and know exactly what you would do in case of an emergency. 

Developing an actual written plan can help you by letting you take action to save your credit as soon as an emergency occurs.  Some items that could be on your financial emergency plan could include:

1) A list of all extras or luxuries you could cut out of your life immediately if you had a problem (i.e. cable tv, newspaper subscriptions, water delivery service, movies).

2) A list of all assets you could immediately sell if you had to.

3) A list of resources you have that could help you in case of an emergency.  Maybe you know a lawyer who deals in financial facets of the law.  Maybe you have insurance that could help you.  Maybe your employer offers a severance package. 

Whatever it is, write it down. Keeping a list of these resources will make them easier to access in case of an emergency.

4) Other ways you could get money if you had to - jobs you could take, things you could rent out to others.

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Reducing your expenses to have more money to pay your debts is the most common strategy for fixing bad credit. However, you can also look at the other side of the equation… income. If you can generate more income you would also have more money to work off your debts.

While you’re repairing your credit, you’ll want to channel as much money as you can into savings and debt repayment.  Having a second income or even just a few hundred dollars a month more can mean that you get your credit improved faster. 

Having a secondary form of income can also keep your credit safe - if you lose your job, you can use the money you make from a secondary source to repay your bills until you find another job. 

There are a multitude of ways to generate more income:

-You can sell some of your “stuff” through the Internet or through a garage sale.
-You can rent out part of your apartment or house to make some extra money.
-You can ask your employer for a raise. 
-You can start your own home based business or small business that can be worked in your spare time. 
-You can get a part-time or weekend job.

Whatever you do, finding an alternate source of income in combination with reducing expenses can help improve your credit immensely.

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Most people are really surprised by how quickly their money seems to disappear.  This is because impulse spending and small-change spending really adds up.  Small-change spending is small spending we do without even thinking about it - buying that morning cup of coffee or a newspaper we don’t need.

Impulse spending refers to buying things we don’t use or need.  In both cases, we end up spending too much unnecessarily, and this is a problem in credit repair because you want to be channeling as much money as you can into savings and debt repayment so that you can repair your credit. 

For a month, try keeping a daily record of every penny you spend - including the money you spend on phones, the money you spend on tips, everything.  You will be amazed where your money goes. Keeping track of your money this way does two things:

1) It allows you to see where you’re wasting your money and allow you to take steps to stop the bad habit.  For example, if you notice that you always buy the newspaper on Saturday but never read it, you can stop buying the paper on that day.  Small savings can add up over the years.

2) It automatically cuts down on spending.  If you write down where you spend your money, subconsciously, you will be much more careful what you spend your money on.
 

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Whether it is buying a car, a home, or creating an investment portfolio, having assets can help improve your credit score by allowing you to borrow against your assets and use them as collateral. 

When you take out secured credit (such as a mortgage) you also enjoy lower interest rates and easier approval.  As you repay your secured debt, your credit score will improve.  Even better, lenders do look at the types of credit you have.  If you have a mix of secured and unsecured credit, you will enjoy better risk rating scores as it will indicate that you have the means to repay your debts.

Building assets and capital is also a way of building financial stability which can help protect your credit score.  If you have assets such as savings or investments, then you have a way of generating income or repaying debts in case of an emergency.  You also have ready money you can use in case of unexpected medical bills or other problems.
 

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-Do you have cable tv?
-Do you build your DVD collection so fast that you can’t even watch all the movies you collect?
-Do you subscribe to lots of magazines?
-Do you smoke cigarettes?
-Do you drink soda?

We all entertain ourselves using money, but most of us have at least one or two forms of entertainmentment that we have either outgrown or don’t enjoy as much as we used to.  Cutting that expense out and investing the savings can put us well on our way to saving for retirement or paying off our bills. 

If you give up your cable television, for example, you can pay off your credit cards that much faster, thus improving your credit score. 
 

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One of the best ways to keep your credit rating in really good shape is to save money each month.  Don’t worry about how much. Whether you’re able to save $25 a month or $300 or more, saving and investing your savings will prepare you for financial emergencies, will get you from overspending, and will allow you to build an investment portfolio that can help you in future years. 

With savings in the bank, you don’t have to worry that a sudden illness will make you unable to pay your bills. 

Saving ten percent of your income is a reasonable goal. You can use your invested savings to make certain that your debts never get overwhelming.  Most employers and banks will even deduct a certain amount of money from your paycheck or account each month to be put into investments. 

This can be a very convenient way to save, as you are unlikely to miss or spend money you have taken out before you can get your hands on it.

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Most of us are very materialistic. We’re also inundated with advertisements that tell us to buy, buy, buy.  When we want to read a book, we buy it.  When we want to go somewhere, we take a cab or drive rather than walking. 

Stopping spending consciously can be hard, but head towards your local library by walking instead of driving a car, buying a used computer instead of a new one - all can help you spend less and save more. There are several ways you can save money and pay off your debts faster by spending less:

1) When you’re out, don’t carry much cash and leave your credit cards at home. You will not be able to overspend this way.

2) Stop catalogs from arriving at your house or throw them away unread - advertisements and catalogs encourage you to spend and buy unnecessarily.

3) Do the job yourself when you can. Eat in rather than dining out.  Dining at restaurants or getting food delivered is usually more costly than doing your own cooking. Wash your own car, mow your own lawn, run your own errands.  You’ll save money doing  something yourself.

4) Make do or do without.  While you are repairing your credit, funnel all your extra money into paying off debts.  Make do with what you have and avoid shopping as much as possible.

5) Watch less television.  This may sound strange, but television can make you overspend - television contains professionally-created advertisements pushing us to spend and spend.  Television ads are so professionally well done that not spending after watching an ad is sometimes very difficult.  Turning off your television or not watching it at all can help you avoid temptation.
6) Buy at a discount or buy it used.  Whether it’s a car, furniture or shoes, you can save money by not paying at the retail price.

Saving your money by spending less can let you pay off your debts faster, something that can improve your credit score dramatically. 

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Many people believe that if they had more money, they would not have to worry about credit.  This is a misconception.  Many people who have money, or at least have all the trappings of money, including cars and nice homes - in fact have terrible credit. 

It’s not how much you earn that decides whether you’re a good or bad credit risk but it’s more about how you handle money.  You could be earning $8 per hour and still paying your bills and meeting your financial obligations - in which case you’ll have terrific credit. 

You could also be earning $500,000 a year and be in terrible debt and financial shape.  The best way to ensure that you have a good credit rating, no matter what your income, is to spend less than you earn.  That means living below your means.  If you have a very small income, you may need to live a lower life style to keep costs down.  If you have a medium-sized income, that may mean saving more and entertaining less. 

Did you know that income is not a factor in determining your credit score?  Although your past and current employers are listed on your credit report - and although lenders may be able to guess your financial status from your loan amounts - your income does not count. 

This means that if you won the lottery today or suddenly inherited a large sum of money, your credit score would not rise.  With your credit rating, what matters is how you manage your money, not how much you make.

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One free and professional source of credit information is your bank.  Your bank officer may be able to offer you a great deal of professional, free advice, as banks are trying harder and harder to provide good personal services to their customers. 

Your bank may also have a number of credit solutions - such as overdraft protection - that can help you keep your credit in good repair.

Banks are realizing more and more that many of their customers are dealing with less than ideal credit.  So banks are trying to meet the demands of this new group.

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