NASHVILLE, Tenn. (CONSUMER REPORTS/WTVF) — A lot of people have struggled the last year, and may not have always been able to pay their bills or at least pay them on time - which can really affect your financial situation for years to come.
If you're not paying your bills that can hurt your credit score. Your credit score can affect everything from the interest rate you pay on your mortgage or credit card to your insurance premiums. Yet millions of people have very low credit scores or no credit history whatsoever. However, there are ways you can rebuild your credit.
It’s a problem millions of people have: credit scores so low, it makes it hard to qualify for a mortgage, among other things.
“A bad credit history can also make it difficult to rent an apartment, go to college or even get a job,” said Lisa Gill with Consumer Reports.
Here’s the kicker - if you want to build up your credit, you need to get credit. But how can you get credit if you have bad credit?
An important first step: Open a bank account, take out several small loans and make on-time monthly payments, which over time should improve your score.
Next, consider applying for what’s known as a secured credit card, which means that you’ve backed the card with cash. You can also ask a family member with good credit to add you to their credit card. Just make sure you have a good relationship with the person because if you miss or are late with a payment, it can ding both your scores.
Additionally, if you have any outstanding debt in collection, pay it off as soon as possible, and make sure to pay all of your bills on time to avoid collections in the first place.
“Once you pay off any debt in collections, many credit-scoring systems won’t heavily weigh them when your score is calculated,” Gill said.
Finally, be sure to check your credit report carefully. Dispute any errors you might find by sending a certified letter with evidence to the big three credit bureaus. They have about 30 days to respond.
There are companies out there that promise to help you fix your credit. But financial experts say be very wary of quick-fix credit services that offer help for a fee. You don’t have to pay to fix your credit. It just takes a solid financial plan and some time.