CardsYour credit is shot. You may think there is no turning back. But you can repair your bad credit. “One can definitely bounce back from bad credit although it will take three to four years of paying bills on time – not late a single time,” says Alice Gresham Bullock, professor of law at Howard University.



You’re not alone. Millions of Americans find themselves in the same boat. In fact, according to FICO Inc., 25.5% of consumers – about 43.4 million people – have a credit score of 599 or below, meaning 1 in 4 people in the United States have bad credit (Fair Isaac Corporation, FICO, is a public company that provides analytics and decision-making services—including credit scoring).



Bad credit can have a negative ripple effect in your life. Those with low credit scores have a harder time getting credit cards, auto loans and mortgages. While it may be a long process to reestablish good credit, it is possible–if you take action now.



According to Dr. Donald Reid, a certified financial planner, many people find themselves in this predicament because, “many have no clarity on the actual real cost of money”. When accepting a credit card or signing for a mortgage, know exactly what it is going to cost you in the long run and if you have the financial means to handle these costs.



“Low interest or low down payment offers are called a teaser [rate] or Adjustable Rate Interest,” says Dr. Reid. “I give you 1% for the first five years and at the end of that five years, it’s going to shoot up to 15%.”



So if you get caught in the cycle of too much interest to pay and too little money, resulting in unpaid bills, how can you boost your credit score again? “Yes, it is possible to bounce back but it will take discipline,” says Gayle M. Gilmore, author of How Would Jesus Invest?  Breaking the Poor Man’s Mentality.



First find out your credit rating and history from one of the credit reporting bureaus such as Equifax, Experian and TransUnion. 



“Make arrangements with creditors to possibly come up with a payment plan. Next, do not add further debt. Cut up the credit cards if necessary,” says Gilmore.
 


Then, consider taking out a secured credit card. You only spend the amount you can put on your secured card. It will allow you to reestablish a good credit history. Start paying your bills on time. 



“Pay bills, loans and credit card accounts on time. Don’t be late even once on any account,” advises Bullock. “And one of the secrets that will really make a difference is to pay bills on time…forget those ‘grace periods’,” adds Gilmore.



“Keep credit accounts open even if they are paid off to show that you have and can maintain credit and don’t charge more on credit card than you can pay off at the end of the month,” offers Bullock. “Keep no more than 1 or 2 credit cards.”



Once you are on the road to recovery, stay there. “Staying out of trouble with debt requires that you diligently adhere to all the steps all the time and live on a budget so you don’t overspend,” says Bullock. “Make a budget and stay on it. Include in the budget a few dollars that goes directly into some form of savings. Look toward building wealth.”



Gilmore agrees. “When you are in credit trouble, a rule of thumb would be not to make a purchase unless you can pay cash. And don’t forget, nothing beats saving your money and investing wisely…Following these simple steps can keep you out of financial trouble for years to come.”