Building Up A Low Credit Score While Struggling With Debt
When you have a bad credit score and
you’re struggling with debt, it can seem impossible to work your way out of everything. The best debt management solutions seem to depend heavily on already possessing a high credit score, but if you’re in the position of needing professional help to manage your debt, then your credit score probably isn’t too great.
The good news is that your credit score can always be improved, and that you have the ability to improve your score even if you’re struggling with debt. Even if you’ve made horrible financial decisions ever since you became responsible (or rather, you were supposed
to become responsible) for your own finances, it’s always possible to bring your score up.
First of all, your credit score isn’t something that will magically improve overnight; it could take years to raise your score, in fact. A large portion of your score is determined by analyzing your credit history, so you’ll have to build up a strong history before you start seeing any significant changes. This means that you’re in the process for the long haul; you’ll need to work on cultivating strategies where you won’t burn out after just a few months.
Making a few really big payments in order to erase your debt as quickly as possible isn’t necessarily what you should be aiming for. If you happen to come across enough money to do so, then it certainly wouldn’t be a bad thing to pay off any outstanding balances you already have before making more big purchases. But it’s important to realize that increasing your credit score doesn’t depend on how quickly you can pay everything back. If you’re able to make regular payments (ideally, these payments would be more than the minimum payments required), then you’re doing everything you need to do to increase your score.
Many people struggling with debt think that closing some of their credit lines will keep them from incurring more debts -- but what they don’t realize is that this will reflect negatively on their credit score. You don’t want to open up a bunch of new lines of credit if you’re having trouble managing the debt you already have, but closing credit lines right after you pay everything back isn’t a good idea either. If you think you might be tempted to start incurring a balance on these accounts again, there are plenty of ways to ensure that you leave them alone (one of the most effective strategies is probably to cut your credit cards apart so that you can’t use them anymore).
Asking about loans and credit accounts will cause your score to go down quite a bit -- even if you don’t end up opening new accounts. Every time you apply for a line of credit and the lender looks into your credit report, your score drops slightly. This doesn’t mean that one loan inquiry will make your score drop by 200 points, and it certainly shouldn’t keep you from looking into opening a legitimate line of credit if you decide that you need to do so. But keep in mind that you’ll want to limit the amount of inquiries you make. If you’re struggling with debt right now, your credit score probably isn’t the greatest. And you should be doing everything you can to make sure that it doesn’t drop any more.
It may sound too simple to be true, but the best thing you can do at this point is to just stay organized and keep making your regular payments. You’ll be able to get a better hold on your debts if you’re able to pay a little more than the minimum payments each month, but nevertheless, making the minimum payments on time
is enough to start building a better credit score.
If you think that you’ll need some guidance and support with this, you certainly shouldn’t hesitate to seek it. Getting help from a financial adviser or consultant won’t hurt your score at all, and having someone else’s guidance might just help you stay organized and confident in your ability to become financially independent again.