Many of us create a list of resolutions for a new year.
Life brings many different types of problems and for some people it is a number on their bathroom scales which is too big and for the others it can be a number of their FICO score which is too small.
You probably are in the group of, let us call it, “financial troublemakers” if you read this article. We will try to help you analyse the problem and fulfill your financial resolution of lifting up your score.
Problems and solutions.
In general, saving money is not as easy as spending it and, unfortunately, the first and the most important solution is to start saving. The good news is that some of the problems can be solved faster. But the whole rest demand a good long term strategy.
Problem no. 1 – Using too much credit.
It concerns you if your habit is to buy too much, impulsively and not necessarily really needed goods. The habit of spending more than you earn is even worse. Look into your credit report and find out where the problem lies. It can show that, for example, you owe too much on your account, you have too many accounts with balances/retail accounts or the balance to limit proportion is not right. As the 30 percent of the score is influenced by the amount of your debt, the situation in which you continue spending more than you earn is unacceptable and becomes a deterrent for any possible lenders.
Problem no. 2 – Too little credit history.
First of all, such an option is still better than having a bad credit history. Do not get upset if you do not have much credit. Lenders can use a non-traditional credit report, which will show the accounts that are not reported in credit bureaus. These would include for example leases, student loans, peer to peer loans, or some utility payments. Also thanks to a regular savings deposit you make, your financial situation will be found settled.
Moreover, you can open one or two credit cards (the limit should be low) and use it to pay while shopping. Yet, it is significant to pay it off regularly on time. Apart from that, another option is to benefit from the good credit history of your family members or friends. When you become an “authorized user” on their account, their credit card history will be also added to your account.
Problem no. 3 – Bad history.
It needs time to rebuild your credit history. If you have collected some “sins” on your account, such as foreclosure,, you must reorganize your current management of finances. The impact your “sins” have on your score lowers with time, so calm down and cool your heels. 12 months of patience and better management will help you pay off your bad actions from the past.
You can deal with it yourself or call for help.
Your finances have 5 years to recover. After this time, you may consider bankruptcy and use court solutions. But first, if you feel that you may not be able to cope with the problem yourself, you can consider professional help. A consumer credit counselor (working non-profit) can give you a lot of useful advice and help you get back on your feet faster.
In conclusion, you should remember that a good plan is crucial. Find out what the problem is, set goals and start building up your score.