Bad Credit now what

Every now and then people fall in the debt trap, sometimes blindly and sometimes with both their eyes wide open. The thing to do to get out of bad debt situation is obviously to improve your credit. And the most it takes is discipline, the rest is summarized below:

1. Get a copy of credit report – if there is something on your report that is incorrect, rectifying it will raise the credit score. Contact the credit bureau immediately to remove any incorrect information.

2. Pay Bills on Time – payment history makes up 35% of the total credit score. Recent payment history will carry much more weight than what happened five years ago. Missing just one month’s payment on anything can knock 50 to 100 points off of the credit score.

3. Pay down Debt – credit card issuers report outstanding balance once a month to the credit bureaus. It doesn’t matter whether a balance is paid off a few days later or whether it’s carried from month to month. Charging less on the card can raise credit score even if credit card balances are paid off every month. Lenders also like to see a lot of room between the amount of debt on credit cards and total credit limits. The more debt paid off, the wider that gap and the better the credit score. Credit utilization ratio plays a major role in credit score determination. Assume that you have a total credit limit of $100 and the balances on your credit cards are $60. Your credit utilization ratio is 60%.

4. Don’t Close Old Accounts – closing old or paid off credit accounts lowers the total credit available and makes any current balances appear larger in credit score calculations. Closing oldest accounts can actually shorten the length of credit history and to a lender that means less creditworthiness.

5. Piggyback someone’s Credit – this is a fast and great little credit score booster. But it requires a very trusting relationship. If your trusting person adds you as an authorized user on their credit card, their payment history is now reported on your credit report too. If they have perfect credit, now you have a perfect account.

To make this more effective, use an aged account. Imagine if the person has a 10 year old credit card account with a perfect payment history and a balance of only 50% of the credit limit. The challenging part? Finding the trusted person! Since you already have a low credit score and bad credit, how eager will someone be to make you a cardholder? Even your parents don’t want you to damage their credit. But, no one says you need to possess the card! In other words, your trusted person could add you as a card holder and never give you the card or PIN or any information. Since the bills and all account information are still mailed to his/her address, you won’t know anything about the account. Try to explain this when you request to be added to their credit card.

6. Play Round Robin – take, 000 (or what you can afford) and get a secured credit card. Once received, get a cash advance of 70% of your credit limit. Get a second secured credit card. Once received, get a cash advance of 70% of your credit limit. Get a third secured credit card. Once received, get a cash advance of 70% of your credit limit.

Open a new checking account with the final cash advance. Use this account only for making payments on your three new credit cards. If you make your payments on time every month, your credit score will increase because you now have three new perfect payment credit cards. (Initially, your credit score might drop a few points due to the rapid, multiple accounts being opened. However, be patient because within 4 months of no new accounts and delinquencies, you will see your credit score increase.