Healing the Heartache of Bad Credit | Opinion


All month I’ve been talking about financial love, and we all know that “love doesn’t come easy.”

There is always a risk of heartache. The final piece of my financial love advice explains why building or rebuilding your credit profile is key to minimizing these risks.

Having good credit affects many areas of your life. Imagine you and your family finally saving enough money for a down payment on a house. You find the perfect home to be turned down by the bank because of your credit. Or maybe your dream is to own your own business.

You’ve found the perfect place, but it needs a little work, so you go to the bank for a small business loan that’s only been turned down. Now you are “dreaming with a broken heart”.

Finally, imagine that you have found your dream car, your first car, to be exact.

Unfortunately, you can’t afford it and your credit situation means financing is out of reach. Three hits, you’re out! At this point you have “Lost that Lovin’ Feelin”. However, there is a chance that the romance will be rekindled; it doesn’t have to end in a tragic love story.

With credit affecting so many areas of your life, consider the following tips to help you rebuild your credit while mending that heartache at the same time.

Tip #1 – Review your credit report

You need to know where you are. The first step in this process is to get a copy of your credit report. You can get a copy from every major credit bureau: Equifax, Experian and TransUnion as a consumer. The best way to get your credit report from all three major credit bureaus for free is to go through

a site called www.annualcreditreport.com.

The good news is that you can request it for free once a week. previously it was only once a year from each office. Check it for any incorrect information. If there are errors on your report, they could negatively affect your credit score. It is important to note that you have the right to dispute errors or

information about your report.

Tip #2 – Pay your bills on time

Being late for a date or forgetting an important event in a relationship, such as your birthday or anniversary, can lead to serious romantic problems. Your finances are no different. Payment history makes up 35% of your credit score, which means your payment history is one of the biggest determining factors. Negative information, like missed or late payments, can affect your credit score for years. Late payments can also result in late fees which can add up quickly!

The sooner you pay your bills, the better it is for your payment history. Consider setting up a budget, automatic payments, or reminder alerts to help you track your bills.

Tip #3 – Try to keep most of your credit limit available

Quality versus quantity is another factor to consider. Credit utilization is a term used to describe the percentage of your credit limit that you are using. The amount you use has a powerful effect on your credit score – in fact, the only thing that matters most is paying on time.

Most experts recommend not going over 30% of the limit on any card or account, as a lower value is better for your score. This is important because keeping your credit utilization below around 30% can show that you are managing your credit responsibly and not overspending. Check credit usage for all your credit accounts and focus on reducing the highest ones to improve your score.

Tip #4 – Consider a secured credit card

Feeling safe is also important when a relationship is recovering from an “Achy Breaky Heart”. A secured credit card is a great product for people who want to build credit from scratch. If your credit card accounts have been closed, you may need to start over with a secured credit card. These cards require an initial deposit, which is usually used as a credit limit, but other than that they work like any other credit card.

Tip #5 – Get a credit CD or secured loan

A credit building CD has one purpose: to help you improve your credit profile. Many banks and credit unions like Southern Bancorp offer these credit building products.

They work by having you take out a small loan, but instead of pocketing the money, it goes into a CD or certificate of deposit. Then you make regular payments until you have repaid the initial amount. At this time, the CD is given to you. The benefit is that your regular payments are reported to the credit bureau to show your creditworthiness, helping you build or repair your credit.

Secured loans work the same way in that you will need to provide some sort of security for the loan, but either way it’s about making your payments on time so the credit bureaus know you’re on the right track. Remember that rebuilding credit can take time as you increase your credit score, as can building a better romantic relationship. The time it takes to rebuild credit depends on your situation.

The good news is that most things won’t affect your score forever. The effects of negative factors may lessen over time. Being patient and building good habits will eventually pay off in the long run!

Remember that getting better credit is possible with responsible financial behavior and it’s never too late to start. “What does love have to do with it”, you might ask? Financial freedom can be achieved if you want to love your money again and have it love you back.

For more information contact me at Charlestien.harris@southernpartners.org or call me at 662-624-5776.

Until next week — Stay financially fit!


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