Tips from The Local Credit Experts
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Credit and Trust
Have you even broken someone's trust and been able to build it back up over time? It's difficult, and it can take a while, but it's certainly possible. Credit at its core is essentially trust: does a lender trust that you'll repay the balance of the loan at the time you agreed on. Of course it's better not to break someone's trust in the first place, but sometimes it's easier said than done. What do you do now?
1. Identify why you have a credit problem
We don't just mean what items you purchased that resulted in you being considered a lending liability. What are the daily habits or external forces that have caused you to seek out loans greater than you can afford? If you keep on doing what you've always done, you'll keep on getting what you've always gotten.
2. Create a budget
To pay down your debt, gain some financial stability, and create a sustainable spending strategy, you'll need a budget. Thankfully there are many helpful resources online to help you do just that. Creating a budget not only provides you with a plan for the coming weeks and months, it also helps you to identify unnecessary or frivolous purchases.
3. Pay down your debt
The less debt you have, the more attractive you'll look to lenders. Catch up on late payments and pay down as much of your debts as you can. Start with the one with the highest interest rate, then once that is completely paid off, proceed in the same manner until all of your debts are either entirely reconciled, or else manageable.
4. Continue making sensible borrowing decisions
Avoid taking out credit that is not necessary. Car loans are appropriate because having a vehicle is often essential in earning an income. Buying jewellery from the shopping channel? Not so much.
Start rebuilding your credit by making your payments on time over a couple of years. Paying off a vehicle on time over a number of years helps lenders to regain faith in your borrowing status, and may ultimately lead to you being able to qualify for lower interest rates in the future.
5. Rebuild Your Credit
Depending on your region, the longest that a negative piece of information (evidence of late or missed payments, bankruptcies, defaults, etc.) can remain on your credit report is 6 to 7 years. Rebuilding your credit will take time, but life is long. You may also find the process deeply satisfying, as you are not only improving your credit standing and ability to borrow money, but are developing entrenched, healthy habits that will be fruitful across many other aspects of life.