Whether you want to build your credit from scratch or fix it after some mistakes, you can take steps to meet your goals. Understanding your credit can help open doors to financial success, the ability to purchase cars and homes, and so much more. But knowing how to build your credit can be confusing. This post will discuss tips on how to build your credit and what to do if you need to fix it.
What Is Credit?
Credit refers to the process of borrowing funds or resources and not repaying them right away. Establishing good credit is about building trust between you and a financial lender. The more you can demonstrate good creditworthiness, the more you can be entrusted with. Several factors go into what makes good credit, but an important part is consistently making on-time payments to repay the borrowed funds. Another thing to know about is the difference between unsecured and secured debt. Unsecured debt, like credit cards, is not tied to collateral, so it’s riskier for the lender. Secured debt refers to car loans, mortgages, and other forms of credit where a lender could take back the collateral if the loan is not paid back.
Why Should You Build Credit?
Unless you have access to lots of cash around, you need good credit to make purchases like a home or vehicle. To build credit, you need to demonstrate you can repay the funds that you borrow. This depends on income and other resources, and the assumption is the more you have, the more likely you are to pay back your debt. However, it can be very difficult to build your credit back up if you get into a pattern of missed or delayed repayments. Even one late or missed payment has a negative impact.
How To Fix Bad Credit
If you find yourself with poor credit, you face paying higher interest rates on loans, which means more money out of your wallet. You also might not be able to get a mortgage or car loan, depending on your credit history. In this scenario, it’s important to take steps to rebuild your credit. The first step to take is to pay any collections or outstanding late payments. From there, keep making payments on time every month to demonstrate your ability to pay back the funds you borrow.
Consider Bankruptcy
Sometimes your debt can be overwhelming, and you may not be able to pay it back without serious financial hardship. Maybe debt collectors call you day and night, and you’ve had enough. In these cases, bankruptcy might be a good choice for you. When you file bankruptcy, you can be relieved of your obligation to repay some or even all of your debt. This is a welcome relief for many people. While filing for bankruptcy does have a negative impact on your credit, it’s often worth it to get rid of the stress that a mountain of debt can cause.
Hire A Bankruptcy Lawyer
If you decide that bankruptcy is the choice for you, hire a bankruptcy lawyer to help you with the process. The Law Offices of David Brunelle serves Western MA, Northern CT, and surrounding areas with top-notch legal representation. Contact us to get started today.