Every adult will be well aware that their financial future is determined by their credit score. One way or another, it is at the forefront of all our thinking. When it comes to credit, there are two types of people in the world. Those that have had an eye on their score from the early stages, and those that neglected and squandered it in their youth.
The people that have managed to look after their credit score are commendable but few and far between. It involves a great deal of discipline to avoid borrowing money that you can’t afford to pay back. Sometimes the temptation is too much. Especially at a younger age, we simply don’t earn enough money to buy the luxury items we may have our eyes on. That results in frivolous purchases designed to satiate our longing for material objects.
Of course, saving money in conventional ways is always preferable to borrowing money. And if you had the foresight to live within your means when you were younger, then I tip my hat in your direction. It isn’t always easy, though. Especially living in the age of consumerism, where ‘must have’ new gadgets and products are a constant source of distraction. That, more often than not, leads down a slippery slope.
Once your credit has gotten itself into a hole, it’s extremely hard to dig your way out. Our past mistakes often come back to haunt us. Invariably so. That’s a big problem. We aren’t equipped with the maturity to consider long-term ramifications of our frivolous spending. We’ve cultivated some pretty bad habits. And one day, the time will come that we’re in desperate need of some quick cash. And on that day, our options are limited.
There aren’t many serious lenders that will give you any modicum of consideration after taking one look at your credit score. That’s what defines your financial responsibility, even if it’s a thing of the past. That can make it almost impossible to find a quick source of money when you need it most. So, how do you overcome this perceived pitfall? There are a couple of places you can turn. But, be aware, each of them come with some consequences.
Improve Your Credit Score
Easier said than done, right? As I mentioned earlier, it’s very difficult to overcome a bad credit rating, but it is possible. At least, if you’re willing to make sacrifices for the greater good. That involves a great deal of maturity and responsibility. Before you even consider this route, you must weigh up whether you have the discipline to see it through. It’s going to take some compromise, some cutting back, and some going without. But hey, it’s worth it in the end.
The first thing to do is to request your credit information. It’s readily available – but you’ll have to pay a fee to obtain it. That might seem counter-intuitive, but it’s going to help you guide yourself through this journey. And trust me, it’s going to be a long slog. The credit file you receive is the same as what is reviewed by lenders. So, this way, you can get a good grasp on where you’re falling short.
A good thing to keep in mind is that all lenders have their own way of reviewing your credit file. They have set their own unique criteria as to how they define ‘good credit.’ You may be in luck, then. Just because one bank turns you down doesn’t mean another will. Consider that your light at the end of the tunnel. And even if you can only make relatively insignificant strides, at least, it’s something.
The only way to repair your credit rating is to, well, pay your bills on time. So, let’s start from there. Debt management can be tough to manage, so organization is going to the key for us. Start by making a spreadsheet of all your debts and order them by due dates and interest rates. Pay off the higher interest rates first, and make sure you get to each of them before the repayment deadline. Slowly but surely, you’ll work your way back up the credit ladder.
One other way to improve your credit score is to explore student loan consolidation. By consolidating multiple student loans or refinancing a single student loan, you may receive a lower monthly payment with a reduced interest rate or an extended repayment term. While extending your repayment term may increase the amount of interest you pay over the life of the loan, it may also put you in a better cash-flow situation.
Make Use of Your Equity Options
This will only apply if you have any assets worth anything. Personal equity loans (and payday loans, for that matter) have become more commonplace. At least since the dreaded credit crunch. You have to be serious about your repayment structure, though, or you could dig yourself even deeper into that hole. Equity acts as a sort of guarantee for a lender. Since they can’t put their faith in you to repay your debt, your personal equity hangs in the balance.
Of course, that means that it’s imperative that you manage to repay the debt in a prompt manner. Failure to do so could risk losing whatever you’ve put against your name, be it your house, your car, or anything else. This is really only an option for those that have a steady income and are sure they can meet the repayments ahead of schedule. Otherwise, look elsewhere.
Ask Your Friends and Family
Okay, so it may not be the ideal solution, but it could be one you haven’t given thorough consideration. Our loved ones are more than happy to help us out more often than not. At least, provided they have the financial means to do so. Your pride might take a hit, admittedly, but as they say, pride comes before the fall. You might have to go begging with your tail between your legs, but it’s a small price to pay for financial security.
Just because they’re your relatives or friends, though, doesn’t mean you can jerk them around. Only go down this route if you’re absolutely committed to paying them back every single penny, and in due course. Otherwise, your relationships may become fractured beyond repair. And what then? You’re left with nobody to turn to. It’s just not worth it.
Getting a loan with bad credit is tough, but achievable. Those are the three ways that are the least risky. If you want to avoid spiralling into more debt, then give them a shot before you turn elsewhere.