Nearly everyone is suffering today under a changing market for credit cards and consumer loans. Even people with good credit histories and excellent credit scores are having the terms of their credit changed by the banks, and sometimes detrimentally. But for people who had bad credit, it’s possible that some of these changes, not to mention the loss of jobs across the US, has caused more people to be left with really bad credit. Believe it or not, there is way out for folks with terrible credit, so here are some ideas on how to fix really bad credit.
Bad credit is the result of not paying credit as agreed, that is, paying late, or not paying at all, on credit or loan balances. With most credit, a delinquency stays on a credit report for seven years. Bankruptcies will stay on a credit report for ten years. In some cases, a judgement can be reinstated on a credit report if it remains unpaid (that’s what you owe after you lose a lawsuit for payment on a debt.) As long as you pay everything on time from this point forward, your bad credit will disappear after those seven years. But pay one debt late, and that late payment will stay on your report for another seven years.
Not only can this type of severely bad credit come from not paying on time, but if you have a lot of credit cards which are maxed out, that will impact your score as well. If you’re paying them all on time, it probably wont’ get you in the range of what could be considered really bad though, but it can hurt your score just the same.
What exactly is really bad credit? Generally a lender is going to treat any credit score under 600 as very bad. A score in the 600s is bad, but not impossible to overcome if the borrower has a job, has been making payments on time for a while, and trying to improve their situation. Really bad credit of course isn’t a technical term, but anything in the 500′s or lower is going to be very hard to get past if you want to get more credit.
When it comes to credit, though, everything can be fixed, eventually. To fix really bad credit, it will take patience on your part. For successful credit card debt reduction, you’ll have to make a commitment to paying everything on time, from this point forward. And if you are unable to pay your debts because you can’t afford the minimum payments, then you need to find a way to get some extra cash and put it toward paying down the balances until you can afford the minimum. You can sell items on eBay or Criagslist, and put that cash toward your debt. If you are serious about improving your credit score, you will have to focus on what’s important, and stop spending on frivolous or unnecessary items, and put all of that money toward your debt balances.
Another option you have is to negotiate with your creditors. Let them know you are in a dire situation, and facing possible bankruptcy unless they work with you to reduce your total debt. Then you can set up a payment plan that you are able to meet every month. If the lender won’t work with you, put them at the bottom of the list as you work with your other lenders to get payments in line with what you can afford. This has the added benefit of making you feel like you can see the light at the end of the tunnel, and that there is hope that in just a couple years you will have fixed your bad credit once and for all.
By trying to still get loans, you can hurt yourself even more. If you want to buy a car with really bad credit, it’s not going to be easy. It’s likely that if you can even find a lender to give you money, it will have so many costs and fees attached that you will pay much more than the car will ever be worth, and lose money if you have to sell down the road. You’d be better off putting those hundreds in extra fees toward buying a car for cash, even if it’s a beater, and putting the monthly payment you would have been paying right into the bank to save for the next car.
The same goes for credit cards for really bad credit. This is the kind of habit that probably led to you getting in this position in the first place – relying on credit, living beyond what you can afford, and paying high fees and interest for credit. Often, credit is used for things we don’t need anyway – extra televisions, clothing, jewelry, toys, video games, and other entertainment items. Consider what, if you have really really bad credit already, you would ever want to continue to get credit in this situation? You might want to just stop the madness, and tighten your belt, and not try to find the credit in the first place until you have your financial situation under control.
Think about how you can budget, work with your creditors, and change your spending habits to go from having really bad credit to just bad credit. The chances are that these kind of changes will convince a lender that you’re on the right track, and result in you getting the loan or credit you need.
