How’s your financial status? Are you creditworthy? These are some of the questions you can be asking yourself. Financial literacy requires a good understanding of two major areas: accounting and management. They allow you to better plan your finances and avoid debt traps that might damage your credit score.
Perhaps you’re already servicing a loan and in need of a top-up to purchase a car, start a business, or put a down payment for your new house. Your credit history might be the only thing standing in the way of you from securing funding for your project.
However, you can seek guidance from financial advisers like Money Trumpet to initiate the application process. It saves you from frustrating experiences like loan denial or rejection.
Here are six steps to take for you to bounce back from bad credit loans.
Develop Repayment Strategy
Bad credit loans are the result of poor financial planning and may cause a significant dent in your account. You need to develop a repayment strategy and clear debts within a given period. It can mean consolidating creditors’ reports or statements to guide you through the process.
Begin by paying off pressing or small loans that accrue less interest and reduce the debt balance. You need to be consistent with one strategy to progress and eventually come out of bad credit loans.
Get Credits Statement From Bureaus
Creditors keep track of every transaction you make in your accounts and they give updates of default to the credit’s bureau. Your account statements will only show the current balance and not your credits score.
Your credit history will show all of the debts you owe that are either unpaid in full or have missed collection deadlines. Ask your financiers to issue copies of credit reports from bureaus and compare them with your bank statements. You can determine whether debts or bad credit loans are causing your accounts to drop.
Suspend Standing Orders
Bank instructions have an impact on your credit ratings, and they can be the point of difference when it comes to servicing loans. If you don’t make your payment on time, the lender can impose penalties on top of your outstanding balance.
Your accounts could be under pressure to pay bills like a credit card, mortgages, and your general upkeep. But your creditors’ accounts remain unattended, which sends wrong signals to the lenders.
It is a good idea to suspend standing orders attached to your accounts in order to avoid the negative consequences of bad credit loans. You can easily bounce back by cutting unwarranted pressure on your accounts.
Remit Loan Repayment Consistently
Once you’ve developed a repayment plan, you need to discipline yourself and commit to making payments when they’re due. You’ll reduce the balance slowly, and it’s one sure way to get out of a bad credit loan.
Constantly review your financial statements to keep track of the reducing balance. It highlights both the pending or overdue loans as well as the written-off debts in your account. If possible, you can automate the loan repayment by ensuring that creditors’ accounts are funded once checks clear in your account.
Settle Other Debts
Small debts might seem like a drop in the ocean, but they have a great impact on your credit score. Ignoring such loans will not make them disappear and may snowball into bigger debts. As you reconstruct your financial wall, don’t forget about the small loans.
Split the bad credit loans into two groups: high priority (they attract penalties) and low priority (collected when available.) You get to decide which one to settle with first.
Supplement Your Income
If you’re relying on one source of income, you can easily get tempted to take out loans. You have needs and wants that demand funding, and creditors are always willing to help. You need to control your income and expenses to reduce the chances of getting trapped by debts.
Create other sources of income to help you support your lifestyle. The extra money can help you bounce back from bad credit loans and improve your creditworthiness.
Bad credit loans are equivalent to poor credit history and may frustrate your development plans. Learn how to balance your finances to keep you out of debt. If necessary, strategize how you’ll repay loans before approaching any creditor to fund your projects. It might include things like budgeting for debts, reviewing your credit statements, suspending and cancelling instructions to your account, among others.
Bouncing back from loans takes a combination of financial literacy, discipline, and consistency. Your credit score can drastically improve as you clear your debts using the steps above.