Bad Credit: How to Get Back on Track

March 27, 2017
Having a bad credit rating is a situation to avoid at all costs, since it can prevent you from having access to funding when the time comes to realize your important life plans, such as buying a house or launching a company.
Bad Credit: How to Get Back on Track

However, in practice, people can find themselves with a bad credit rating for all kinds of reasons. Fortunately, it is possible to restore one's standing with creditors by using simple tricks. Here are some tips to help you recover.

Repay Debt before It Is Due

Since bad credit is the result of late or missed payments, the goal here is to demonstrate that you are not only able to repay your debt, but able to do so before the deadline stipulated by the contract.

Indeed, paying off your balance in advance helps to restore your reputation in the eyes of creditors. To that end, make several small purchases with your credit card and repay them before their due date. Repeat that tactic a number of times, making sure never to miss a single payment.

Get a Secured Credit Card

Are banks refusing to issue you a credit card because of your poor credit history? Don't panic. Get a secured credit card. To procure one, you must give the creditor a deposit or an amount equal to the credit limit attached to the card, for example $500, as a guarantee that you will be able to repay.

Subsequently, you can start using the card to make purchases. Ideally, you should make the payments before the due date specified on your statement. Once you have demonstrated your ability to meet your payment deadlines, you can ask for your deposit back, and eventually reapply for credit cards that do not require a deposit to financial institutions.

Do Not Apply for Multiply Credit Cards

It is better to have one card that you use for big purchases than ten with which you make small acquisitions.

In fact, the number of active credit cards in a person's file can contribute to giving him a bad reputation among creditors; so limit yourself to a single card to avoid problems.

Limit the Use of Credit that Is Allocated to You

Also, do not use all the credit that is available to you. It is advisable to limit the use of your credit to between 20% to 35% of the credit allocated to you. Using credit too freely is a sign of indebtedness or financial difficulty and financial institutions may interpret it as an alarm signal and refuse to lend you money, uncertain that you have the means to repay your loan on time.