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7 Steps to Take if You Have Bad Credit

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Man in suit standing with arms crossed with graphics reading BAD CREDIT and GOOD CREDIT on either side of him.

Image source: Getty Images.

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Bad credit is one of the most frustrating financial problems because it affects your life in so many ways. You’ll need to pay higher interest rates when borrowing money. It can stop you from getting approved for credit cards and loans, and even impact apartment applications. In many states, car insurance rates are also higher for consumers with lower credit scores.

If you have bad credit, you probably know you need to improve it. The hard part is figuring out how. To help with that, here are some simple steps you can take to boost your credit score.

1. Use a credit score tool to monitor your credit

The only way to know whether your credit score is improving is to keep an eye on it. Fortunately, there are quite a few free ways to get your credit score. These services typically provide an updated credit score every month. They also often give you tips to improve your score based on your credit profile.

2. Review your credit report from each credit bureau

Your score is based on the information in your credit report. If there’s anything inaccurate there, it could hurt your score. The best way to avoid this is to regularly review your credit reports.

There are three consumer credit bureaus that put together credit reports: Equifax, Experian, and TransUnion. Sometimes there are differences in the information each one has for you, so make sure you get your credit reports from each credit bureau.

You can get your credit reports online at AnnualCreditReport.com. You’re normally legally entitled to one free credit report from each credit bureau per year, but the three bureaus are offering free weekly credit reports through April 2021 because of the COVID-19 pandemic.

3. Dispute inaccurate items on your credit file

Getting negative items removed from your credit file could lead to a big increase in your credit score. Common incorrect items include:

  • Accounts incorrectly reported as late or delinquent
  • Accounts reported with the wrong balance or credit limit
  • Accounts belonging to another person who has the same or a similar name
  • The same debt listed multiple times
  • Fraudulent accounts opened because of identity theft

If you find any inaccuracies on your credit report, dispute them. This is easy to do online. Here are the links to dispute items with each credit bureau:

4. Get current on any delinquent accounts

Your payment history is the biggest factor used to determine your credit score. Late payments can dramatically lower your score, and the longer you go without paying, the more damage it will do. Note that a payment must be at least 30 days late before the creditor can report it as delinquent to the credit bureaus.

If you have any delinquent accounts, it’s important to make payments on them ASAP. This will stop the account from getting any further past-due and hurting your credit even more. If you can’t make your payment, try contacting the creditor to see if you can pay a reduced amount.

5. Pay down credit card balances

Another component of your credit score is your credit utilization ratio, which is the amount of available credit you use. Here’s a quick example. Say you have a credit card with a credit line of $10,000. If your balance is $8,000, your credit utilization would be 80%.

High credit utilization is bad for your credit. The higher it is, the more your credit score will drop. A good credit utilization to aim for is 20% or less. If you have $10,000 in credit lines from all your credit cards, you’d want to always keep your total balances below $2,000.

That may seem like a challenging goal right now. Remember that every bit of progress helps. As you pay down credit card balances, you’ll see your credit score increase.

6. Use a credit card regularly — and pay it off on time

For a good credit score, you need to build a strong payment history. The most effective way to do that is to use a credit card regularly and pay the bill on time. Make sure to pay in full so you don’t get charged any interest.

The reason this works is simple. When you use your credit card, you’re borrowing money. If you pay on time, a positive item gets reported on your credit file. Every month you do this, you build up a longer history of on-time payments. If you can’t qualify for a regular credit card, a good secured credit card might be an option.

7. Apply for new accounts sparingly

While you’re working on your credit, it’s best to limit credit card and loan applications. There are two reasons for this:

  • Each time you apply for new credit, the lender will perform a hard credit inquiry. This has a small negative impact on your credit score.
  • The average age of your credit accounts affects your credit. When you open a new account, that average age will decrease, which can also damage your credit score.

You don’t need to avoid credit applications entirely, but you should be selective. For example, if you already have a credit card, it doesn’t make sense to open another until you’ve improved your credit score.

Your roadmap to better credit

Once you know the right steps to take, there’s nothing particularly complicated about raising your credit score. That doesn’t mean it’s easy — some of the steps above require hard work and take time. But if you’re willing to put in the effort, you’ll be rewarded with a much better credit score.

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Bad Credit

AOK seminar to look at outliving incomes

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The North Central-Flint Hills Area Agency on Aging (NC-FH AAA) has announced a new Zoom seminar that provides older Kansans with information on what can happen if people outlive their incomes and how to avoid this situation.

The Answers for Older Kansans (AOK) seminar is scheduled for May 27 at 5:30 p.m.

Paul Shipp, managing attorney at Kansas Legal Services, will present Living Longer and Running Out of Money. Shipp will cover the financial problems that can arise from living longer than you had planned. Topics covered in this presentation include bad credit, reverse mortgages, avoiding credit card debt, and bankruptcy. A handout from Kansas Legal Services on ways to protect your income and assets will be available to those who register.

Registrations must be made by noon on May 27. To register visit ncfhaaa.com/seminars or call 1-800-432-2703.

The seminar is without cost, however, donations that support and expand services for older Kansans, people living with disabilities and their caregivers are welcomed.

Details on how to participate in Zoom technology are available at www.ncfhaaa.com and login instructions will be sent to those who register.

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Can I be denied a job due to bad credit?

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Can I be denied a job due to bad credit?
Image source: Getty Images


People often worry about their credit history when it comes to applying for a new credit card, a mortgage or a car loan. If you have poor credit, should you also be concerned about finding work? Can you be denied a job due to bad credit?

Let’s examine the facts.

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What is bad credit anyway?

Bad credit is basically a negative assessment of your finances based on your history of borrowing. Bad credit implies that you have a bad track record with lenders. This is most likely because you have a pattern of not paying your bills on time or defaulting on your loans.

Is it legal for employers to check my credit report?

Law and finance firms are legally required to perform credit checks on potential employees. However, other kinds of employers can also conduct credit checks on you before they hire you. But they must ask for your permission before they do so.

In many cases, a credit check will be performed by a company if the role you are applying for involves dealing with large amounts of cash.

Why might employers want to check my report?

There are many reasons an employer might want to check your report. For example, they might want to ensure that:

  • You are who you say you are.
  • You have a good track record of managing money.
  • It’s not too much of a risk to let your manage money.
  • Your financial behaviour will not affect your work performance.

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Rewards credit cards include schemes that reward you simply for using your credit card. When you spend money on a rewards card you could earn loyalty points, in-store vouchers airmiles, and more. MyWalletHero makes it easy for you to find a card that matches your spending habits so you can get the most value from your rewards.

Can an employer deny me a job due to bad credit?

Yes. According to credit reference agency Experian, if your prospective employer feels that your current financial situation could impact your ability to perform well in the role, or if your credit history shows poor financial planning, they may decide not to hire you.

Generally speaking, however, employers are more likely to be concerned about serious ‘red flags’ in your credit history, like bankruptcy rather than the odd missed payment.

In any case, employers only get access to your ‘public’ credit report. This contains your electoral roll information and any major red flags such as bankruptcies, individual voluntary arrangements and county court judgments.

They will not have access to your detailed credit repayments or your credit score.

How can I keep my credit history from affecting my ability to get a job?

If a prospective employer runs a credit check on you, ultimately you have no control over what they do with the information, including denying you a job due to bad credit.

The best thing you can do to minimise the impact of your credit on your chances of getting a job is to review your credit report beforehand.

You have the right to one free credit report per year from each of the three credit agencies (Experian, TransUnion and Equifax). Before you apply for a job or attend an interview, request your report and review it for any errors so that you can have them corrected ahead of time.

Even if there are no errors, knowing what is on your credit report puts you in a good position to answer any questions that may arise during the hiring process.

Indeed, if there’s something in your report that employers might consider a ‘red flag’, don’t panic. Instead, begin preparing an explanation to give to them. If it was, for example, caused by financial hardship beyond your control, the employer may take this into account.

Alternatively, you can contact a credit reference agency and request that a notice of correction be added to your report. This is a brief note of up to 200 words in length that explains circumstances that a lender might otherwise question.

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Refinancing Your Subprime Auto Loan

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Refinancing is a wonderful way to save money on your monthly car loan payment – but it can cost you more in the long run if you’re not careful. Refinancing when you have a subprime auto loan isn’t always as easy as refinancing a vehicle when you have good credit. Working with the right lender can help, though.

What Is Refinancing?

Refinancing is when you replace your existing car loan with a different one for the same vehicle, which may have either a lower interest rate, a longer loan term, or both.

Qualifying for a lower interest rate is optimal for getting a lower monthly payment and saving money overall. If you only extend your loan term without getting a lower rate, you actually end up paying more in interest charges over the term of your loan.

Auto loans typically use a simple interest formula, meaning your interest charges add up daily. The longer your loan term, the more you pay the lender – it’s wise to choose the shortest loan term you can afford. If you only extend your loan term you may end up paying more than the vehicle’s value!

Refinancing can typically be done with your current lender or with another one. It’s a good idea to shop around for the best possible rate before going with the first offer you receive. When you shop for the same type of financing with multiple lenders in a two-week timeframe, it’s called rate shopping. When you do this only one credit inquiry impacts your credit score instead of multiple, minimizing the negative impact that hard pulls can have on your credit score.

Options for Bad Credit Borrowers

Taking out a subprime auto loan is a great way to improve your credit, so, if you’ve kept up with your loan to this point and just need a little wiggle room in your budget, refinancing could be for you. Your credit is an important factor in refinancing your auto loan because refinancing is typically reserved for people with good credit.

However, when a borrower already took out a subprime car loan, many refinancing lenders are willing to work with them as long as they’ve made improvements to their credit over the course of the loan. Better credit alone doesn’t qualify you for refinancing, though.

In order to qualify for refinancing, you, your vehicle, and your loan all need to meet the requirements of a lender. These vary, but in order to refinance your car you typically need to meet these qualifications:Refinancing Your Subprime Auto Loan

  • Have a better credit score than when you began the loan
  • Have had your auto loan for at least one year
  • Have an acceptable loan amount
  • Have no more than 100,000 miles on your vehicle
  • Car can’t be more than 10 years old
  • You must be current on your payments
  • There can’t be negative equity in the vehicle

Lenders that refinance typically prefer cars that are in good condition, that aren’t too old, and have lower mileage. Some lenders may not want to refinance a vehicle that’s at risk for breaking down or is depreciating quickly.

They’re generally looking for a loan that isn’t too new, or too close to being paid off as well. And, refinancers may also require that you haven’t missed a payment on your original car loan. A borrower whose current on their loan gives a lender confidence you’ll manage the new loan well.

Alternatives to Refinancing Your Subprime Auto Loan

If you’re not able to refinance your vehicle, you typically still have the option to trade it in for something more affordable. Even if you’re still paying on a loan, all you have to do is pay off the loan to release the lien on the car.

Even if it’s years from the end of your loan term, you may have a good chance at trading in your vehicle, especially now. Due to fluctuations in the auto market, used cars are in high demand currently, which means that dealerships may be willing to pay a higher price to get your used vehicle on their lot – even if you’re a bad credit borrower looking to trade-in.

If you still owe on an auto loan this gives you a better chance at selling your car for the amount you owe to the lender. It may even give you enough cash left over to put toward your next, more affordable vehicle!

Ready to Get Started?

If you think refinancing your subprime auto loan is the way to go, you can check out our resources, here. But, if you think that finding an affordable, used car with a lower monthly payment is the right choice for you, we want to get you started toward your goal today!

At Auto Credit Express, we’ve got a coast-to-coast network of special finance dealerships ready to work with borrowers who are struggling with credit challenges. To get connected to a dealer in your local area that’s signed up with subprime lenders, simply fill out our auto loan request form. It’s fast, free, and never carries any obligation.

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