Getting Back On Track After A Financial Mishap

Whether we like it or not, our society and economy has become accustomed to using credit as a means of obtaining good, services and in some cases necessities. Since the recession hit many consumers are regressing (in a good way) to living a simpler life, cutting unnecessary expenses and focusing on better management of their money. Unfortunately for some folks those changes have been made AFTER experiencing a eye opening event such as bankruptcy or another financial mishap. Your credit history and credit score can take a beating after a financial hardship. Many people recovering from a hardship will argue that they do not plan on using credit ever again. Even if you do not intend to use credit in the future, it is vital to your financial security to at least have the option available which requires taking steps to rebuild your credit. Here are a few tips to get you on your way to better credit. 

• The first and easiest step to rebuild your credit is by paying your bills on time- every time. If you have trouble remembering when bills are due or getting organized to ensure they get paid on time, consider using an auto-pay method to avoid late payments. You can schedule these payments through your bank website, merchant website or a direct withdrawal from your checking account. Remember thirty-five percent of your credit score is based on payment history, making paying your bills on time very important.
• If you haven’t already eliminated your debt, develop a strategy to do so as soon as possible. Your debt to credit ratio is considered when calculating your credit score. Ideally you will not use more than 30% of your available credit, however up to 50% is acceptable.
• Keep track of your credit by viewing your credit report. People with bad credit generally have a tendency to avoid reviewing their credit report. After all, who wants to see more bad news. If you have changed your spending habits or overcome a financial hardship, viewing your credit report can be a great way to track progress as you rebuild credit. Get your free credit report from each agency each year for free. Space your requests between agencies to see your report at beginning, mid-point and end of the year.
• Credit card companies have been changing the rules on how consumers should handle their accounts. If you are going to be using credit you must stay on top of changes in the credit card industry. At one time using your credit responsibly was all that was required to stay in their good graces. The best way to avoid sliding backwards in your journey to better credit is by using credit minimally and paying your balance off in full each month. If you don’t feel confident that you can control your spending, you may have to avoid using credit cards all together.