Being a successful and responsible adult involves taking important decisions like the place where we desire to live, to consider a retirement fund or even an extra income out of Forex Trading. However, prior deciding for any of these viable ways to invest our money we should consider what do banking entities and businesses, in general, require of our credit score for engaging in these activities.
For some people, with just their clean credit score it’s more than plenty to fulfil requirements; for others, you would need to consider a series of strategies which involve being debt-clean, increasing your salary, among other variables. Therefore, let’s review some strategies that prove to be efficient for fixing our credit history prior taking the leap of making significant investments.
#1 – Acknowledge your real financial status
This is, at the same time, the easiest and most neglected step to follow. People often consider that just by not looking at debts and keep paying them they are going to be cleaned sooner. Big mistake!
You need to sit down with all your paperwork in place, using aids like Microsoft Excel or Google Spreadsheets to create a proper document where all payment dates, sums and interest rates are expressed; then, you can trace an efficient strategy to fix any debt.
Start by prioritizing those debts that relate to credit cards, especially those who have been on hold for over a year of paying minimums. By killing those debts sooner, you are also saving money, since prolonging those debts over time instantly translates in hefty interest rates to pay over the course of months and even years – which at some point banks may end up asking for the entire sum of your debt as the minimum.
#2 – Set a limit for your credit card expenses
The ideal sum you should consider as top debt for credit cards is 30% of your current income. People often consider credit cards as part of their earnings, which ends up becoming the reason why they end up with debts they can’t even manage in the short term.
Unless you consider special scenarios like unexpected situations (helping a family member, solving a problem in a nutshell, not making enough a month and you need that extra income) or getting a huge discount on a purchase – for which you, later on, pay the entire bill on your next credit card balance – avoid the temptation of buying more things than you actually need.
#3 – Pay your bills in time
This not only applies to credit cards and loans, as they get increased interest rates and penalizations by not committing to payment dates but also to public services bills like electricity, phone, water service, etc.
Even if they can’t negatively impact your credit score in the short-term, you are keeping another debt under your name that sooner or later is going to slap your face.
Paying bills in time not only keeps debts at bay but also helps to reduce your stress levels by knowing at least your home expenses are well-tracked.
#4 – Identify the source of your debts
Perhaps this is easier said than done, as it requires not only an entirely honest approach on our behalf, but also it may need help from other people like accountants or even close friends.
Where did we start to lose track? Was it because of an unexpected casualty or just to keep the appearances of a higher lifestyle than what we can afford?
If the source of your debts answers to the second question, remember that people aren’t valuable for what they have or what they make a month, but for what do they are as human beings. Life is like a rollercoaster, and some day you may feel on top but the very next at the bottom. People who actually value you won’t care what car are you driving (if you have any) or the clothes you are using, but they appreciate your virtues as a person. That cannot be bought with any credit line or cash.
#5 – Don’t fret over your credit score
In case you are denied a new credit line because facts don’t help your cause, consider that the place where you are applying for credit might be too picky, or that in fact, they are helping you by not letting you carry another debt. Not every single purchase is made with credit, hence why you should put your focus in creating your own savings fund for this kind of investments to make.
If you consider there is a mistake on what’s in a credit report, you can always ask for the detailed information and trigger the source: maybe a forgotten debt or just your income isn’t as high as expected. Rest assured that most bad credit score data is cleaned between 2 to 7 years after paying your debt, which means you can get another chance in a close-by future, perhaps with conditions becoming adequate for your situation.
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