Bad credit is not a term anyone likes to hear because it can severely affect your financial health and limit your options for acquiring assets.
You can develop bad credit if, for example, you fail to pay your overheads on time, avoid paying off debt or get into problems with your bank by racking up huge credit card bills.
Naturally, if you incur these types of problems, you will struggle to persuade money-lenders to work with you because they will not trust you to pay your loans back on time and in full.
Bad credit can create a vicious circle because you will be less able to pay off the debts you already owe and move on to better financial health in the medium and long term.
However, this is not to say you will be unable to extricate yourself from a bad credit score. There are clear methods you can use to help better your financial situation and avoid bad credit scores in the future.
Here’s how to manage your finances when you have bad credit:
You can still get a loan even if you have bad credit
If you do find yourself with a bad credit score, the first fact to keep in mind is that it is still possible to get a loan.
Bad credit is not uncommon, and there are many people who struggle to find suitable loans.
For example, if you’re looking to purchase a property, finding a company to construct a mortgage package for you is difficult. This is why companies now specialise in giving out competitive mortgages to individuals with bad credit ratings, such as a CCj mortgage.
You can then use these loans to help put yourself back onto an even financial footing and build a healthier monetary position off of.
Aim to create cash flow so you can pay your bills on time
When you have bad credit, your number one priority should be to get rid of debt and boost your credit score. This will better enable you to take out loans and mortgages in the future and prevent the situation from occurring again.
Although there are mortgage deals available if you have a bad credit rating, this should not be seen as an excuse to keep accruing debt. These debts have to be paid eventually, so it is advisable to focus on building solid and consistent income streams to attend to this.
Reduce your spending in the short and medium-term to pay off any excess debt
Another tip for managing your finances when you have bad credit is to reduce your spending and overheads in the short and medium-term as much as you can to relocate this money to sort out your credit score.
To make this process easier, take a detailed look at your weekly expenditure, and find out ways to temporarily reduce your financial outlay.
Even seemingly small expenses – such as gym memberships and eating out – can take a significant chunk out of your bank account over time, so consider putting hobbies on hold until you have sorted out your credit situation.
