5 Tips To Reverse Bad Credit
A lot of what we know about money and credit is from decades past.
Teaching jobs paid a “decent and respectable” wage that you could count on for the rest of your life.
You could look forward to retiring at age 55 and living out the rest of your days in comfort.
And you just didn’t get into any debt. All debt was bad and you avoided it at all costs.
So what does that have to do with good debt and bad debt?
Well, today is different.
Jobs, unfortunately, just aren’t secure.
Teaching jobs today are well known for not being chosen for the money you make (people teach because they are dedicated to educating others, not for the money).
You may retire, but it will be a decade after 55, and that doesn’t mean you stop working (many go on to work in grocery and retail stores to afford the tax on their homes).
And the average person needs more than a million dollars to secure their retirement.
So is it really a surprise that debt is no longer quite the same as it was decades ago? Not at all.
It is actually more surprising that there is no mainstream financial education.
Debt has two forms – good debt that pays itself off while it simultaneously provides you a benefit, and bad debt that requires you to use your resources to maintain it with only a short-term benefit.
Most of us are familiar with bad debt, but did you know that you can turn your bad debt into good debt?
It just requires you to change your habits.
Here are the 5 Tips to Reversing Bad Credit by turning your bad debt into good debt.
- Debt should pay itself off and provide you a benefit in return. Your 14 credit cards with 65 – 80%+ utilizations need to be paid down below 35%. If your cards have available balances, you can use the available balance toward the payment of a card to bring the utilization back down to 0%. Here is why:
- When you use the available balance on snacks, gas, or bills, you won’t see that money again.
- Using the card’s available balance to pay another card frees up the available balance on the second card. It pays a debt and pays you back.
- Eventually, with strategic planning, you can pay the balances down on all of your cards and keep your utilization low.
- Consolidate your debts while your credit is bad. Those 14 credit cards are not all providing you the best benefits. Some of the cards have lower interest than others. Consolidate the cards down to 3 or 4 by transferring your credit line to other cards. This will raise your credit lines, providing you with more leeway in your utilizations, and will help you keep better track of your credit cards. Do this while your credit scores are low so that the hit you take can be lessened early.
- Only apply for credit cards to get a high credit line. The higher your credit line, the higher your available balance will be. This is a great way to lower your utilization without making payments right away if you have had your cards for a long time.
- Know that your credit lines can be used as collateral. The purpose of credit cards is to have access to other people’s money (OPM). Having access to OPM allows you to purchase assets – investments that create a cash flow to increase your income). Your goal shouldn’t be to pay for gas and lunch and have access to credit cards for emergencies only. This will create a situation where your utilization sky rockets for an unpredictable and unknown situation. Create other ways to increase your income using those credit cards so that you create additional incomes to protect you from emergencies instead. Make the purchase of incidentals an easy non-factor to your income.
- Diversify your credit portfolio. Get a secured personal loan to diversify the types of accounts your credit will give you access to. This will raise your credit scores with other factors by paying yourself back on time.
I hope you enjoyed reading this post. If you have any questions about the 5 tips to reversing bad credit or changing bad debt into good debt, or you have written your own review about reversing your bad credit, leave me a comment below.
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