The point I am trying to make is that paying a ton of money to a bank in interest for a very long time doesn’t seem like a great plan to me.  If getting a credit card for your bad credit is the first step in a big plan to improve your bad credit than go for it; if you don’t have a plan here are some suggestions:

• Learn Your Credit Rights – There are lots of laws that allow you to challenge negative items on your credit report. We are currently working on developing a legal section that will layout all of these laws in a way that make sense and let you talk with confidence to your creditor or a collection agency about your consumer rights.
• Start Working With Creditors to Remove Negative Items – If you write a letter to old creditors, they be willing to work with you. You will never know until you try.
• Get Out of Debt – Decreasing your credit utilization on your existing revolving credit lines can have a positive impact of your credit score.

Remember just getting a credit card for bad debt isn’t a complete plan to increase your credit score.

The problem is that when people think about fixing their credit score, they are using common sense and thinking about what kind of person they would lend money to. It makes sense to you and me that a person who has paid off all their debt may be a good person to lend money to because if they have paid all their bills even though they were late, they wouldn’t have a problem making a new payment to someone else. It also shows that that person is honorable because they paid back their debt even though it wasn’t secured by any collateral. If you don’t pay off your credit card debt, banks really can’t do anything except try to ruin your credit so that you can’t do it again to someone else. The problem with this approach to credit repair is that your credit score isn’t calculated using common sense; it is calculated using a computer generated algorithm. Computers don’t have anyway to look at your character or know what your intentions are.

Paying down credit card debt does help you fix bad credit, but not in the way you think. One factor of your credit score is how much you use your credit. This is called your credit utilization percentage. This is calculated by dividing your existing credit card balances by what your total credit limit is on all your credit cards. By paying down your credit card debt, you do lower your credit utilization percentage which means a marginally higher credit score and a step towards cleaning up bad credit. Here is the problem: your payment history makes up 35% of your credit score.  More recent payment history weighs more heavily as a factor than older payment history, so if you recently missed payments, you can expect that your credit score will tank temporarily. In order to get to the heart of the solution of bad credit, you need to work with your creditors to get them to remove negative items off of your report once the creditors realize that you are someone that they want to continue to lend money to in the long term.

Equifax, Experian, and TransUnion will update the information on your credit report. Your existing creditors that extended you a revolving line of credit will use your updated credit report information to adjust your interest rate or the balance amount that they will extend to you even if you never were late making a credit card payment to them.  Remember the reason that you missed your payment in the first place? Now all your credit card debt has gone up when you consider all the additional interest you will have to pay.  Even if you missed one payment that isn’t going to hurt your score as much as missing multiple payments which might happen now that you have less money and have to pay more interest.

Many people consider the fact that having credit card debt can have an impact on your credit because of high credit utilization, but also keep in mind that having high credit card debt makes you vulnerable to a dramatic financial event in your life and puts you into a cycle of debt that can feed on itself.

Your credit card company may raise your interest rate due to a lower credit score even if you make your payments to them on time. This is often included in the terms and conditions that are provided when you accept the card, though many people do not realize that until after they are slammed with higher fees.

Businesses may shorten or eliminate any grace periods you have for payment if they notice late payments to other companies. This is because you become a greater risk for payment based on their own internal credit policies. What this means to you is, when that 30-day grace period evaporates, you are suddenly reported for being late on payments that were considered on time before.

Your insurance rates may increase as a result of lower credit scores; some unscrupulous insurance companies may even attempt to cancel your policy. Higher rates will show up at policy renewal as you are moved into a new risk class with the company. Cancellation of your policy may be enacted due to only one missed payment and without notice if your credit score is deemed too low.

Many companies run a credit check on prospective employees, and do not hire prospects with scores below a certain level. This can be for many reasons, but often companies site that individuals with poor credit often have issues that cause distraction and poor employee performance.

If you work in a company that requires a security clearance lower credit scores can endanger your employment as you are considered a greater risk to security if you have a low credit rating. People with jobs that require security clearance are continually evaluated on a number of factors, and their credit score is one of those.

As you can see, there are numerous ways in which a poor credit score can affect your life in the here-and-now, not just the future. With the current problems in the financial sector, these issues can only be expected to worsen as banks are forced to restrict their lending and credit lines to those who have excellent credit. Poor credit can cost you hundreds or even thousands of dollars in rising interest rates, higher premiums, and shorter payment cycles.

Because credit and credit ratings are used so often in our society, credit management services are becoming more popular with all individuals, not just those with poor credit ratings. Improving your credit score will not only help with getting future lines of credit for a big purchase such as a mortgage or car, but it can also help to improve your current credit situation as well.

Doesn’t it make you sick to think about how much money you’ve already thrown away? It made me sick. So, I finally decided to do something about it. I finally realized that by cleaning up my credit and managing my money instead of letting it manage me, I didn’t have to live like that anymore.

I realized that I hadn’t been taught how to manage money correctly. I hadn’t been taught how the credit game works. We just weren’t really taught that in school. So, I decided to teach myself about money management and personal finance. It’s one of the smartest things I’ve ever done.

I no longer pay twice as much for things. I no longer worry about whether I’m going to get approved or not. I no longer worry about whether I’m going to have enough to pay my bills. I no longer have these issues. I have piece of mind because I’m responsible with my money and I have control over it. It no longer controls me.

If you are not at that point yet, I really hope that you get there. It’s not just about money. It’s about time. Your time is precious. Stop living and thinking like a slave. To have financial freedom, you need to change your whole mindset. You need to learn how to repair your credit and how to manage your money. Then, you need to pass that knowledge down to your loved ones. It’s one of the best gifts you can ever give. Get started today.

If you’re ready to start living and stop worrying, let the professionals at Lexington Law Firm help you remove negative items from your credit reports.