First off, let’s face the facts. It is not an easy thing to get rid of a bad credit score. A bad credit score will not only reduce your chances of getting the loan, but it’ll also affect you in many other ways. For example, you may have to say goodbye to some of the basic facilities like electricity and gas that you are enjoying.
Therefore, now, more than ever, the importance of maintaining a good credit score has increased amid the coronavirus crisis. The only way to avoid bad credit scores even if you are running low on cash is that you prioritise your bills in a manner that it’ll build your credit effectively.
In this blog, you are going to find the top 10 tips that will help you to prioritise your bills when having a bad score credit.
1. Know the Math
The first and the most important thing to do is to understand how the credit scores are calculated. In simple words, credit scores are the grades that the agencies report to your lenders. Your credit score is also known as FISCO score. Creditors use this score to figure out if you are a credit risk or not.
You’ll not be able to make any difference in your credit scores if you are not doing all the calculations right.
2. Write Everything Down
The most important part of getting your scores straight is to know what you owe. You may think that you have figured it all out in your head, but believe me, when I say, you’ll miss a lot of important stuff. So, make sure that you write all your expenses and bills down on a paper.
Not only this practice will help you prioritise the bills effectively, but you’ll also know the extra expenses that you can easily cut from your budget.
3. Add Your Debts in the List
One of the mistakes that people do when they are prioritising their bills to maintain a good credit score is that they forget their current debts. However, it is a mistake you simply don’t afford because your FISCO score depends on it as your previous lender’s words matter the most when it comes to getting a new loan.
So, when you are prioritising your bills, you need to keep your debt payments in mind as well. It’ll be hard since you are already running low on cash, but it is something that plays a critical role in getting a new loan.
4. Identify the Must-Pay Expenses
When you write down details of all your bills and expenses, you’ll automatically realise what should be your top priority and what kind of bills can wait a little longer. For example, the rent of your apartment or your mortgagee should be your top priority as you must have a roof over your head.
However, you’ll have at least a month before your electricity and heating services will be cut so you’ll have some time to figure it out. Your food budget is a great example of adjusting your expenses. It is something that is extremely important, but at the same time, you can manage it and reduce the cost significantly.
5. Consider What Immediately Affects Your Family
If you have a bad credit score, then it means that there will be no option for you to get money in case of any emergency. Therefore, it is critical that you keep the needs of your family in your mind while you are prioritising the bills. For example, the medical bills, the electricity, etc. affect your family directly. However, your car instalment is something that can wait as it’ll not directly affect them.
6. Watch Your Utilisation Ratio
Apart from prioritising your bills, your utilisation ratio can help you improve your credit score. But, let’s see how it is going to help you in prioritising your bills. If you know everything about your utilisation ratio, then the chances are that you might be able to stretch some money from your credit cards that you think are useless now.
7. Don’t Forget Your Credit Cards
Speaking of credit cards, you must never forget them to add in the list of the bills. Understand that getting rid of a bad credit score and getting a new loan is not something that is going to happen overnight. You’ll have to make long term planning, and you simply can’t afford to exclude your current credit card debt. So, when prioritising your bills, make sure that you are leaving enough money behind to pay your debts as they are going to affect your FISCO score to a great deal.
8. Get Help from Friends and Family
At this point, you must be done with the homework that you need to do to improve your credit score and manage your bills. However, the chances are that you may need some extra cash to meet your credit goals by paying your bills. So, ask for help from your friends and family and assure them to return the money as soon as you are out of the crisis.
9. Make a Payment Timeline
Prioritising your bills means more than just paying them. Making a payment timeline is also very important. It is especially critical when you have a credit score to improve. Make sure that you are not delaying your bills more than 30 days. You don’t have to pay all the bills at a single date, but making a timeline will help you to manage your payments effectively. If done right, it’ll even help you with buying some extra time.
10. Stick to the Payment Schedule
As I’ve said earlier, improving your credit score and managing your bills while having a bad credit score is a long process. The only thing that can help you get through this process is consistency. So, make sure that once you make a payment schedule, you stick to it by all means.