Many people wonder if there is one simple tip on how to repair bad credit and avoid falling into complete financial ruin. In fact, there is one central task that you can embark on and turn your bad credit into a good rating that will allow you to buy what you need when you need it. The tip is a very simple one to state, but not quite so simple when it comes to implementing the advice into your life. The single best tip to turn your credit rating around is to learn to live within your means.
This one simple bit of advice actually encompasses a number of different actions that you will have to implement in order to truly get the most out of this tip and then improve your credit rating. Like most journeys, the best place to begin with living inside your means is to start at the beginning.
As the first step in your new journey to financial security and good credit, you will need to get a realistic understanding of just how bad things are right this minute. This will mean the sobering task of adding up every penny that you currently owe on credit cards, mortgages, car loans, and any other installation type of debt. Chances are that you will be shocked by that bottom line figure.
Next, look at what you pay each month for fixed expenses, such as rent or a house payment, utilities, and food. Do not forget to include those minimum payments on those credit card balances. As a final factor, look at how much you have spent in the past month on such items as entertainment, meals out, snacks at work, and all those little things that we so often pay for with a credit card. This may also be an eye opener, as there is every chance that you will find that the amount of monthly expenses is more than your actual income. At this point, you will begin to have a pretty good idea why your credit rating is going downhill fast.
To start turning this situation around, you will need to make some changes. The first thing you will need to do is look at your monthly expenses and start trimming back anything that is not a true obligation. You can not do without running water in the house, but you can stop eating out every night. Cooking at home may not be exciting, but it can save you a ton of money every month. Also, look at entertainment. Why are you going to three movies a week when you have cable service? For that matter, why do you need four premium movie channels when you never watch them? Separate your needs from your wishes, and you may find that there is a lot of waste that you can cut out and bring your monthly expenses into line.
Once you have implemented a working budget that covers all the essentials and allows you a limited amount for a little fun now and then, it is time to turn your attention toward whittling away at those credit card balances. Line all your cards up by the outstanding balance. Keep paying the minimum on the cards with larger balances, and double up on paying off the card with the lowest balance. Once that card is paid off, set it aside and earmark it for emergencies only. Then move on to the next card on the list. Reducing the number of cards you have with an active balance will help provide motivation for staying on track. Also, as you pay off balances and keep them paid off, your credit rating will stop that downwards slide, level out, and then slowly begin to improve.