It may sound a little condescending to say, “in order to improve your credit score, which is bad because you couldn’t meet repayments, you need to make those payments and, moreover, start saving money.” but, by changing a few habits and adapting to your new situation, it IS possible. Here’s a few ways you can start.
Improving Your Credit Score.
Logically, improving your credit score or maintaining a high level will stop you wasting money, as you will qualify for the lowest interest rates on loans and credit card APRs. That means you will pay less over the duration of your repayments. You will notice a considerable difference even moving up one credit tier!
Most scoring models focus on these catergories;
- Payment History (accounts for 35% of most scores)
- Credit Utilization (accounts for 30% of most scores)
- Length of Credit History (accounts for 15% of most scores)
- Mix of Accounts (accounts for 10% of most scores)
- New Credit Inquiries (accounts for 10% of most scores)
So, in order to build your credit rating you need to be trying to make all loan repayments on time, as well as keeping the total amount of debt you owe beneath the 30% mark. You can achieve this by working out a repayment plan, either by yourself or with the aid of an advisor, and making sure you’re not applying for new credit accounts. Time frames are also important; make sure you are maintaining long-term credit accounts, avoiding too many unnecessary changes, and keep so variety eg. have both instalment loans and revolving loans.
Most importantly, don’t skip monthly repayments to save money for a big, exciting thing. It might be tempting to rush towards that stress-relieving holiday or new kitchen, but be realistic. Missing payments will further damage your score and incur late fees. Future You will not thank you!
Use Bad Credit Loans as a last resort.
Loan repayments that were too frequent and too large to cope with probably gave you the bad credit in the first place. Bad Credit loans are often of the highest interest and longest terms, so applying for another to ease your current predicament will only damage you in the future. Use only if you are truly desperate, and borrow the lowest amount possible. It will also help if you put together a repayment proposal beforehand, to give yourself a realistic and manageable timeframe in which to pay it off.
Set small, daily savings goals.
People who charge themselves with impossibly large tasks tend to adopt the “flight” response. They will end up in a constant, debilitating cycle of procrastination-guilt, which we can only wish was as productive as it is stressful! This does not and never will help anybody. Be positive, and be realistic; determine what savings goal you want to get to, and break this down into a daily total. Suddenly, this will seem much more achievable! Take it one day at a time, and have a system of encouragement in place for any days when you slip up, so you can get right back on track the next day.
Try making a list of all the things you want to gain from having savings. Whether you want to be able to book that holiday to Croatia lease or buy a new car, or just having something behind you for a rainy day, it can help seeing your goals written down in front of you when motivation is proving difficult.
Ultimately, saving money is difficult for everybody, not just those for bed credit already. It can be helpful to remember that everyone needs to have patience, realistic goals and discipline to actually save responsibly. Everyone loses motivation and slips up occasionally, but it is how they respond that matters. Try doing everything above and keep working on improving your credit scores for the future, and you will be well on your way to achieving those long-term savings plans.