Running a business or investing your hard-earned money is all about taking calculated risks. There are times when these calculated risks pay off and sometimes they don't. When they don't, life can be really tough. Your credit score takes a plunge and you land in heavy debt. The only thing to do is to pick up the pieces and work hard to get out of the financial quagmire.
You don't need to be a finance whiz to figure out how to fix your credit score. Some good business sense, entrepreneurship skill, and willingness to persevere is all that it takes. Before you begin, just make a thorough analysis of your current financial status. List out all the details of your current liabilities, assets, and your bank balance.
Get a credit report of your current financial status, from the institution which maintains the rating records. This is important as you need to know the numbers thoroughly before planning anything. When you know what your liabilities are, you can set realistic targets and strategies of overcoming them.
Rebuilding On Your Own
Any credit score below 600, on the FICO system, is considered to be low. Anything above or around 700 is a good score and it is what you are aiming for. The factors that decide your score are the current debt in your name, your past repayment history, and your credit card usage history. In short, the overall financial history of a person, will affect his score. There is no quickfire technique of repairing credit. It takes time. Here are some suggestions which may help you out.
Cut Unnecessary Spending
The only resource that is going to help you improve your score is money that can pay off debts. To generate that money, besides thinking about how to earn more, you must learn to cut costs. Identify the spending instances which are unnecessary and you could do without. Only spend on things that you must and invest only in things which will help in your business.
Create a Budget Plan
Create a budget allotment plan that covers your basic needs and also allocates funds for debt payments. This part is very important if you want to have any hope of improving your credit score.
Avoid Usage of Credit Cards
One of the simplest ways is to keep credit card usage to a bare minimum. Do not open any new accounts. Restrict their usage to emergencies. The last thing you want is creation of an even heavier credit card debt burden.
Pay up Your Bills on Time
Paying off your bills on time and especially the credit card bills will go a long way in improving your score. Settle your debts, as soon as possible. That will create good credit history, which will help in the long term.
Negotiate with Your Creditors
In case you are falling short of funds for repayment, contact your creditors and communicate your story to them. Try to negotiate for more time and concessions. Frankness and honesty in matters of negotiations does help.
Stay Afloat and Avoid Declaring Bankruptcy
When a person declares bankruptcy legally, it does provide him with relief, but it stays on his credit report for years. As far as possible, avoid the declaration of bankruptcy or else your score will take a plunge. Let it be your very last resort.
The strategies presented above, will work in the long run and certainly raise your credit score, if you stay consistent in implementing them. The going will be tough but determination in overcoming the financial crisis and self-belief will give you the power to sail through these rough waters.