Where to Start When You Have Bad Credit

Whether they realize it or not, more people than ever have bad credit. When it comes to buying a home, this is bad news for the prospective buyer. If you are ready to buy a home, you need good credit in order to impress the lenders you will be asking to loan you money. But sometimes it can be confusing to see where you should begin to repair your credit. With so many leaks in your financial history, how do you begin to plug them up?

Find Your Credit Score

The best thing you can do is find credit score. This is a free process in most cases. Each citizen is entitled to one free credit report every year. Even if you already have your credit report, you can also pay to receive this report from one or all of the three major credit reporting agencies – Experian, Equifax, and TransUnion. This report will tell you what your rating is from 350 to 850. The higher your credit rating is, the better you will look to lenders. While you may never have a perfect credit rating, you want to have it as high as possible.

Look at Paying Those Bills on Time

One of the easiest ways to help improve your credit score is to start paying your bills on time every month. When you don't make a payment on time, it affects your credit score negatively, which can cause lenders to be hesitant to lend to you. After all, if you can't pay your regular bills on time, they may worry that you won't pay your mortgage payments on time too. If you have troubles paying your bills on time, you need to look into automatic bill pay options. This will deduct the money from your checking account every month so that you don't have to write a check and mail the bill physically. If this is not something that appeals to you, you may also want to set up a filing system at home that reminds you when you pay your bills on time. Remember to send your bills at least a few days before they are due to be sure they arrive on time.

Reduce Your Credit Card Debt

The biggest concern for many would-be homeowners is their credit card debt. With the average credit card debt total around $2000 per household; it is no wonder than more people are seeing red when it comes to credit cards. However, in order to increase credit card ratings, the first step is paying these debts down. When you carry higher balances, it can seem as though you are living beyond your means and that is not what a lender wants to see. Try paying more than the minimum balance each month in order to reduce the balances as quickly as possible.

Think about Credit Counseling

If you are still having trouble with increasing your credit score, you might want to look into a credit counseling service. They can talk to your credit card companies to get your interest rates reduced, thus reducing your credit card balances more quickly. These companies can also help you learn better spending practices to help you learn how to spend and save more wisely.

Getting rid of bad credit is simple when you know what caused the trouble in the first place. From this point on, show lenders that you are a reliable customer.

Craig Elliott