Sunday, November 27, 2011

Personal Finance: Tips for Those with Bad Credit

In order to achieve financial success, everyone needs to start by building good credit. The best way to insure that you have good credit is to make good financial decisions and build good credit from the beginning, but sometimes, situations arise that make a bad credit score unavoidable. For those who have bad credit, starting to improve your financial situation may seem like a daunting task, but you need to realize that your credit goals are achievable.

Follow a Budget

This is probably the most basic tip to help anyone get ahold of their financial situation, but it is also the most curtail. In order to build a better credit score, you need to pay all of your bills on time and in full. The only way you can do that and still be able to save money and feed your family is by following a strict budget. You need to break any bad habits you may have, such as spending more than you earn or living on credit cards, in order to move forward, and you can only do this if you make the daily decision to stick to your budget. You need to find every possible way you can save money each month, even if that means saving $.25 with a coupon at the grocery store. Every little bit will add up to a lot of savings in the end. It may not be easy or fun, but it is the only way you can get your finances under control.

Pay Cash

If you find that you are overspending or that you have made a habit of not following your credit card purchases, use cash for all of your purchases instead. Most people find it much harder to part with their money when they physically see it leaving their hands, and when you always pay with cash, you will be more likely to avoid buying something you can’t afford. Set aside money every month for your savings and to pay all of your bills, and then keep enough cash on hand to cover your budgeted amount for other items (groceries, entertainment, etc.).

Keep Track of Your Credit Report

No one else is going to check your credit report for you, unless they are checking it when you apply for a loan, an apartment, or even a job. It is up to you to know exactly what others will see when they review your credit report, and do everything you can to make sure that that information is up to date and accurate. You can get a free copy of your credit reports every year, so you should have no excuse as to why you can’t check your credit. When you get your credit report, you will need to find the negative items, find out why they are negative, and fix the problem before more of these items show up. Most negative items on your credit report should be removed after seven years (ten years if you file for bankruptcy). If there is outdated or false information, you have the right to notify the credit bureaus and request that they fix the mistake.

Seek Outside Help

If you have tried everything imaginable and still can’t seem to get your finances under control, it may be time to seek help from a professional. There are many credit counselors who would be willing to help you find a way to get out of debt. It may take some time and money, but you will feel much better when you know that you are debt free. Make sure you find the best counselor for you, and be aware of scams and untrustworthy people who will try to prey on those with bad credit and debt.

This is a guest post by Amanda Clark who is an author who writes guest posts on the topics of business, marketing, credit cards, and personal finance. 


ChampDog said...

Just to share, I have 10 engineering friends and 10 non-engineering friends.

Only 2 of my engineering friends owe credit card's money but for non-engineering friends, 8 of them owe credit card's money.

Can I make generalized conclusion here? lol

LCF said...

Does that mean those with engineering background are more financially savvy? :)

ChampDog said...

Maybe they're more "frugal". They usually very careful on their spending. I"m one of them. :)

Quick Unsecured Loan Provider said...

Thank you for these tips. It would definitely be a lot easier for people with bad credit to manage their finances well with the help of these suggestions.

maveric said...

Hi CD,

Long time no hear..! I cannot agree more on the tips on this topic.

Not too long ago,a bumi-gentleman in one of his books that I bought remarked that to stay financially savvy,the one and only mantra is..'To Spend Within Your Means'..& gurus like you & Kris are actually kind enough to teach people the skills & ways to do it.

It is truly a commercialized & temptation filled world out there.People has not changed the emotional and perception aspects of their spendings /life-style expenditures etc.

Let's take car purchased...

In my working life,I have bought 2 cars 'new'as the company gave me interest free loans for both occasions & they were payable within 36 months through salary deduction.Well..I can conclude now that they were dumb decisions as 1)the vehicle was actually serving the company more (in sales) 2)I bore the depreciation & 3)I tie myself up with a 36 months loan where the $ could have been better invested..! The other 6 cars after that were all 'used' vehicles where loans were paid-up within 24 months or in cash.

I shuddered on a typical car loan nowadays.. 6 to 9 years!! That bumi-gentleman said that if your loan is more than 3 years,it means that you cannot afford that car..!
Before one sign on the dotted line,please visualize on a 9 years(108 months) time frame : it is like caring for a child from birth until he/she finishes Standard 3..with no!!

As usual,sorry for the 'cheong hei' comment.

ChampDog said...

For me, I consider myself afford to buy a car only if I can pay cash in full if I really want to. I only have one car and I took 4 years loan due to low interest after subsidy by my company

Talking about car loan, I lot of people do not know that car loan interest is always 1.9X higher than the housing loan interest although somehow the % number is lower. The explanation is here.

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