Having bad credit might not seem like a big deal. In fact, you might not even know what a credit score is! But the second you’re ready to make a large purchase like a car or a home, your credit score will become the most important thing outside of your down payment.

Your credit score, which can range anywhere from 300 to 900, determines your credit worthiness and shows lenders how much of a risk you are to them. The higher your credit score, the better. Anything above 700 shows lenders that you’re low risk and unlikely to not pay back the credit they might loan to you. And on the flip side, if your credit score is under 620, your ability to secure a loan will start to get difficult.

This score is based on multiple factors like your payment history, outstanding debt, credit account history, recent inquiries, and types of credit. So if you’re not careful and studious with your money, you might find yourself labeled as a high-risk borrower.

What happens if I have bad credit?

If you have bad credit, it’s not the end of the world. Improving your credit score will take patience and a lot of discipline, but it is possible!

Here are five tips on how you can start rebuilding your bad credit.

  1. Review your statements—Know how much you owe, how much you pay each month, and when each balance is due. Reviewing your statements is also important to ensure there are no erroneous charges and your payments are being tracked correctly.
  1. Pay your bills on time—Now that you know what your monthly payments are, make sure you’re paying them on time. If you can’t pay off the entire balance, it’s very important to make at least the minimum payment for each bill. Not paying your bills on time will only negatively affect your credit score.
  1. Mindful debt and spending—If you have debt, according to many experts, it’s good practice to keep your debt under 30% of the total credit available to you. Therefore, if you need to create a budget to ensure you’re not keeping more than 30% of debt, then do it!
  1. Stop applying for more credit—Every time you apply for new credit, a creditor checks your rating and after two checks into your credit rating from external sources, each inquiry is listed in your credit rating and will eventually negatively impact your score. Why is there a negative impact? It’s because it shows creditors that you’re having a hard time finding credit and may not be financially stable.
  1. Apply for a secured credit cardThis contradicts tip #4, but a secured credit card is necessary and one of the only ways to rebuild your credit score if you’ve recently filed for bankruptcy or are new to the country. Secured credit cards require you to provide a deposit to the card issuer as a guarantee. Therefore, as long as you can leave a deposit, you’ll most likely be approved for the credit card and you can start to rebuild your credit worthiness by paying the balance regularly and on time.

By following the tips above, you’ll find your credit score slowly improving after just a short few months! So stay disciplined and spend mindfully. Good luck!



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