If you have ever been denied a credit application then you know just how embarrassing it can feel. Even though nobody around you cares it can feel like everybody is staring right at you and judging you.
When this happens, the majority of people become too shy to talk about their finances ever again and instead don’t’ make any changes to improve their financial position.
If this sounds like you then this article is here to help you make simple changes which can improve your financial situation and your creditworthiness.
Consolidate Your Debt
It’s likely that you don’t have just one debt. The majority of people have two or more debts spread over a range of different providers.
The problem with this is that most people make only the minimum payment required and continue to use the cards each month until the line of credit is again reached and the cycle continues. While this may seem effective, all you are doing it paying interest and not actually improving your finances.
If you have multiple smaller debts, consider moving them to a debt consolidation loan. A consolidation loan operates by transferring all of your existing debt and lines of credit over to one large debt with a single repayment each month.
While it may seem overwhelming to have all of your debt in one place, the ability to see your debt decrease as you make your repayments is a great way to stay motivated and on track.
Stop Spending Your Savings
In addition to lowering your credit, it’s important that you also show a level of savings. Why is it important to save while you are still paying off debt? Because your credit score is affected by many aspects, one of them is your ability to show a consistent level of savings.
Pay attention to that word, consistent. It doesn’t mean putting money into savings and then taking half of it out days later because you had to pay an unexpected charge. It means a consistent level of savings.
The best way to achieve this is to plan a realistic budget which allows for these expenses. For example, if you enjoy visiting the movies or you can’t get enough of online shopping, at the start of the month, buy a booklet or pre-paid general admission movie tickets or some vouchers from the Groupon Coupons page for Neiman Marcus and use them throughout the month.
Learn to Love Direct Debit
The function of direct debit gets a bit of a bad reputation because it’s often associated with late payment or declined debit fees. And while these fees are real, they are only payable if you don’t manage your direct debits correctly.
Start by creating a separate bank account which you only use to pay your bills. Then, each month, deposit all of the money your budget allows for bills into this account. Now, all you have to do is to set up your direct debits with your service provider and watch your bills pay themselves on time, every time!
As you can imagine, paying your bills on time each time is a great way to improve your credit score and overall creditworthiness as it shows that you are able to manage your finances.
Just because you are in a bad financial position now doesn’t mean that it can’t change. Take on the tips above and enjoy financial freedom!