Raising a family can be quite a challenge in today’s modern world. From rising prices of groceries to an increasingly competitive job market, it can be tough for breadwinners to keep up with all the things life throws at them to provide a good life for their families.
This difficulty can be even more pronounced when your name is tied to a bad credit score. Having poor credit is a major financial impediment for homeowners and family providers, as it impedes the ability to get a financial “bail-out” when times get unbearably tough.
Beyond that, having bad credit significantly hinders one’s financial flexibility. It puts you in a position where you’re less than a few bad calls away from struggling to provide food on the table or being unable to pay rent for your home.
If you find yourself in this predicament (or inching dangerously closer towards it), then it can be understandably anxiety-inducing to be in that position. The good news is that there are some effective strategies families can employ to sustain themselves and work towards improving their situation.
If you’re curious to learn more about how to thrive with bad credit, then you’re in the right place. This article will give you some strategies you can consider to improve your credit score. Let’s jump right into it.
1. Prioritise Building Your Emergency Fund
If your credit standing is not in the best shape at present, then you’ll need to prioritise building it to optimal levels.
The bad news is that this can take some time and consistency on your end, with one mistake or minor payment delay setting you back significantly. The good news? There are other ways to mitigate financial risks, with one of them being building a personal and family emergency fund.
An emergency fund is a store of cash that’s only meant for use during emergencies. It should have a total of about three to six months’ worth of your income, but more is definitely better.
For instance, a medical emergency, an unplanned house renovation, or a car part purchase are examples of events when having an emergency fund would be ideal.
By having an emergency fund, you’ll rely less on external streams of cash and instead have some allowance in your bank account that you can take out on an as-needed basis. With multiple variables to take into account besides your own challenges, it’s crucial to have an emergency fund ready to use to ensure that you can take on whatever challenge may affect you or your family.
2. Review Your Credit Reports
Another strategy that you should consider to stay afloat even with bad credit is to review your periodic credit reports.
It’s not enough to simply know your credit score, you should also know how your standing has been evaluated and what has gone up or down since the last period.
These credit reports show you more than just the breakdown of your score. They also display your borrowing history, your various loans and payment records, and any existing loans that you currently have.
Moreover, keeping a close watch over your reports can help you identify any errors or inconsistencies that might be lowering your score. Sometimes, payments marked as “late” or old accounts that should’ve been closed still appear active, thus affecting your credit profile negatively.
By reviewing your credit reports, you can catch these erroneous entries (or simply see your bad habits) and work towards correcting them. In turn, this can help you improve your credit profile sooner rather than later. If you need financial assistance and you have a poor credit history, there are always options like car finance for someone with poor credit from Azora or financial institutions that specialise in this type of finance.
3. Create a Realistic Family Budget
Budgeting is a crucial life skill that you should learn how to do early in life, regardless of whether you’re living independently or with a family. The reason is simple: a budget gives you a bird’s eye view of your spending and income.
Having a budget helps in restricting mindless or impulsive purchases that you may be tempted to make when browsing the internet or going to the store.
A budget also helps you spot opportunities to cut costs, making it easier for you to pay your ongoing debt and keep your finances in good shape.
Making a budget from scratch is fairly simple. The easiest and fastest way is by using a budgeting app or a budget template in spreadsheet software. Once you have your budget format ready, input your income, costs, and capital. You should also create a goal and financial ratios to help provide structure to the overall act of saving up.
From there, it’s all a matter of adjusting and rebalancing the budget to match reality and fit your needs. Ensure that the budget includes costs from the entire family, as this helps you understand where the bulk of your cash goes. In doing so, you can make your household stable and financially in good standing—even if you’re taking on debt and have a bad credit score.
4. Pay Your Bills on Time
A powerful way to increase a bad credit score is by consistently paying any bills that you may incur over the month on time.
Your payment history is something that lenders can track and use for their credit evaluation process—and it’s one of the most significant factors out there for that expressed purpose.
If you show to lenders that you make on-time monthly payments, you’ll have a better chance of getting a good credit score, which can allow you to borrow higher amounts.
Conversely, if you are a late payer, this communicates to lenders that you’re not reliable with money, thus giving you unfavourable borrowing rates, granted that they accept your application if at all.
To start paying your bills on time, you’ll have to maintain a strong sense of discipline. An easy and straightforward way to ensure timely bill payment is by marking due dates on your phone’s calendar.
You can also consider enabling automatic payments for regular expenses like credit cards and utility expenses by asking your bank about it. They’ll be sure to provide you with some help on the matter.
Over time, consistent payments rebuild your family’s credibility in the eyes of these financial institutions. This sets the right foundation for breadwinners to build a stronger future for your family.
5. Teach Your Kids About Finance
Good financial habits start at home. If you model impulsive purchasing behaviours, your kid may do the same over time. This is because their environment heavily affects their lifestyle—so if you model less-than-ideal behaviour, your kid will observe and end up doing the same thing.
If your kid is still young, then you can give them an age-appropriate lecture on financial concepts. Then, once they become older, you can start covering more difficult topics like credit, interest, and debt.
By making finance a regular conversation, you help your kids develop responsibility and confidence with money. Over time, these lessons can help them overcome their bad credit struggles.