Having a poor credit rating can be debilitating because it can impact your plans. Maybe you’re at a point now where you can be responsible about your credit and want to buy a house, buy a car, and look good on paper. A lot of people make mistakes with their credit and go on to later on buy a house, a car, and improve their credit rating substantially.

How do you fix your bad credit?

It used to be a matter of getting your credit score and manually fixing all your old mistakes and then just waiting for them to disappear because enough time had passed. You used to be able to wipe the slate clean after 7 years. But today it can also be about your credit score as well as your credit history that impacts your ability. Even once your bad debts are paid off and your file is empty, new lenders will look at your score and how many inquiries are on your account when they consider approving or declining your credit application.

Even if all your old mistakes are in the past, you might need a decent credit score to get ahead.

Tips for Rebuilding Your Credit

• A bad credit car loan. High risk car loans will come at a high interest rate and you might need a big down payment but the regular payments can show up quickly on your credit report as positive feedback. A lot of car loan places will lend to high risk customers because the car is collateral and because they can make more profit on the transaction due to price premiums. The extra money you pay ‘may’ be worth it for building your credit
• A prepaid credit card.  Pre-paid credit cards have interest rates and they hold your money (and typically keep the interest) but this is a good way to show regular payments and credit responsibility. After time has passed the company may transition you to a regular card and credit your balance (read the fine print before signing up, though!)
• A high interest loan. You can take out a high interest loan with collateral and pay it back on time. Some people simply leave the money in the bank so that it can get paid back
• Save money in a high interest savings account and get a loan using it as collateral
• Ask your creditors to take your bad reviews off. If you arrange to pay a bad debt, they might remove their bad report so use that as a bargaining chip when making payment arrangements.

After you begin to re-establish yourself, stay on target and stay on budget. Check out the money jar budget for tips about living lean and saving for the future!