Recent world events have many of us scrambling to get our financial situations under control. If your credit has taken a hit, you can take steps to bring your numbers back up. Awareness is the first step.
Figure Out Where You Are
Create a spreadsheet that has four columns. You will need to track
- who you owe
- your monthly payment
- the total debt (as applicable)
- the interest rate
You can do this on paper if necessary, but it will be more effective if you can sort it. Sort it first by the monthly payment from largest to smallest. What can you do to lower those payments? Start this process before you worry about creating a budget to help you understand your biggest challenges.
Free Up Cash Or Earn More
If your landlord approves, you may be able to bring in a roommate. You may also have an easier time of it by switching your rent payments to match your paycheck dates; coming up with your total rent payment in a monthly chunk of cash may be stressful.
Picking up a second job can also be helpful as long as you have a target to throw the money at. For example, you may find that you can pay almost all your debts if you wipe out a couple of small loans. Instead, choose the smallest credit card balance and put extra dollars into that debt. When you get the balance wiped out, keep the card open. Give it a month and call the card issuer to see if you can get a 0% APR loan on the card.
Load Up 0% APR Cards To Wipe Out Interest
Once you know the maximum, you can borrow from the card you paid off, load it up with high-interest debt and pay off as many cards as you can. Keep them open to keep your credit utilization number as high as possible. Divide the total owed on the rollover by the term minus one month; for example, if you now have $2,000 to pay off in 18 months, give yourself grace and set up payments of 118, or $2,000 / 17.
Stash Some Cash
Put away as much money as possible as you lower your payments by paying off your debt. An emergency savings of at least enough to cover your rent will reduce your stress and protect your credit repair goals.
According to Lantern by SoFi, finding a credit card offer for poor credit will be much easier if you can set up a secured credit card. If you have a history of not managing credit well, the deposit you make on that secured card can serve as a reminder to spend wisely.
Poor credit will cost you in a lot of ways. You may have to pay a deposit to get utilities turned on. You will likely pay more for insurance. You may even struggle to get a better job. Understanding where your money is going right now can help you make smart decisions in the future.