We all know, more or less, how credit ratings work. It’s like a reward system for being smart with money. A lot of us wish that there was a system in place that forgives everything when you get to, say, thirty. Those mistakes you make when you’re impossibly young and enthusiastic are exactly what stops you doing the adult thing. You want to buy a house? Well, you shouldn’t have put that month in Mykonos on the credit card, should you?

And that’s maybe a bit unfair on the young. Whatever age we are, we can do damage to our credit rating by being a little careless, or just being unfortunate. We’re expected, these days, to have a little bit of a balance on credit cards, loans and mortgages. But circumstances can change suddenly and, before you know it, you’re in a mess. So can you turn it around and start making things good again?

Making The Right Call At The Right Time

6736170827_3b8b51b12e_bImage from Flickr

To build correctly for the future, you need to accept when you’ve made some mistakes. We make them at all ages, and acknowledging them is important in order to learn from them. Quite apart from anything else, when you let a debt run for awhile you run the risk of defaulting on it. And lenders are naturally reluctant to lend to people with defaults on their record. It’s not impossible, but it limits your options.

You’re Not The Only One In This Position

It’s common for people to think that, because they have a muddy credit history, there is no way they can borrow to escape it. Are remortgages with defaults possible? The surprising answer is that yes, they are. And if you borrow responsibly and make the repayments, it is an excellent way of bringing your credit score back to a healthy level.

If You Have Bad Credit, Should You Be Borrowing?

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Image from Wikipedia

The question of borrowing is a complicated one. Ideally, if we could all fund everything we wanted to do from cash we owned, no-one would borrow. But then no-one would ever buy a house. Even if you have bad credit, borrowing isn’t off the cards, it just needs to be realistic. Do you want to go travelling for a month? Fine, if you have the disposable cash. If you need to borrow for it, it’ll need to wait for a while.

On the other hand, if you’re looking to buy something you need – and can make the repayments – borrowing, even with bad credit, is OK.

The way of the world, at present, is that for some of the bigger ticket purchases we need to borrow. To cut people with bad credit out of that picture would be a real restriction on any economy. But of course personal responsibility has a part to play here.

If you want your future to be better than your past, you have to be realistic. Don’t borrow to fund wild flights of fancy. Borrow for things you need and make those payments. Before long, your score will be more than respectable.