Joanna Marie, Executive Chronicles | Every moment is the best time to start repairing bad credit history. Many people go into debt when young where credit card loans are taken out and not paid in time. It is extremely difficult to repair a tarnished credit history, and the process can take several years. Credit companies use your history to assess your ability to repay loans, and you can miss out on crucial loans in this period. Here are six tips to repair an already tarnished credit report;
Be informed and proactive in personal finance
First, you should know how your credit rating operates because it has adverse effects on your life. Keep a close eye on the repayment dates for loans especially if you plan on having a family. A late payment will wreck your score and affect your financial future. You want to be able to apply for a mortgage or joint bank account with your spouse without being sidelined due to bad credit.
Second, ensure you read your free credit reports. Most Australians get an annual credit report, but according to Veda (the biggest Australian credit reporter), 89% have no idea what their credit score is. The credit scores range from 0 to 1200 with the national average being 771. A score of above 833 is rated as excellent while anything below 622 suggests that you will likely default in the next year. Check your rating for outstanding debts and loan defaults to keep your score above 622.
Track your spending (and borrowing)
Thirdly, if you have a poor rating, keep track of your spending, especially on credit cards. Remember, an event that happened two or three years ago might ruin your rating, but keeping a positive account balance will slowly increase your score.
Fourth, do not make unnecessary applications for credit. This is because of a large number of inquiries in a short time say 6 inquiries in a year, will further tank your credit score.
Consulting with your creditor
The fifth tip is to check if any debts have been listed inappropriately. Consult with your creditor to correct such mistakes which can further drive down your credit score. The professional consultant from Mutual Service are always here to help. Any personal data that is irrelevant to your financial capacity to pay loans should be removed as well.
Sixth, if you know, you will have trouble repaying the loan in time, have your creditor know in advance. This will prevent the loan from becoming a default. It is also good practice to set up a direct debit plan to pay loans and bills since it will keep your credit history clean, and you won’t have to stress over making the repayment date.