As we all know, credit is super important. You need good credit to get a mortgage for a house, to buy a car and rent an apartment. Good credit can get you better rates on insurance as well. However, at one point or another you may find yourself with bad credit. You may think that your life is ruined and that you have reached the point of no return. Don’t fret. There is always hope. Let’s look at what your next steps are if your credit score takes a hit.

  • Take a look at your credit reports and scores

A good place to start is to check your credit report. Did you know you get a free report from credit bureaus every 12 months? This gives you a baseline to start from because it helps you better understand your current credit position. Be sure to check for possible errors on the report. Credit bureaus sometimes make mistakes, but you can dispute these and it’s a relatively easy process. Once they are verified, they get removed from your report and your credit will be one step closer to coming back from the dead.

Your credit report is used to help calculate your credit score and we recommend checking it about once a month. Checking your credit score can be free through websites like Credit Karma. It is considered a soft credit inquiry, meaning that it does not affect your credit score. Soft credit inquiries do not hurt your credit because they aren’t connected to applications for new credit. Those are called hard inquires. Hard inquiry is when a financial institution, like a bank, checks your credit history and score when making a lending decision. So, when you apply for a mortgage, credit card, or any type of loan they will conduct a hard inquiry. A hard inquiry shouldn’t have a detrimental effect on your credit score, it could only lower your score by a couple of points. One single hard inquiry only stays on your credit score for about two years, but you should think twice before you apply for multiple forms of credit close together, since it may be a red flag to some lenders. Any hard inquiries prior to applying for a mortgage can affect your eligibility.

  • Be on time paying your bills

An easy way to start bringing your credit above sea level is to pay your bills on time. According to Forbes, your payment history makes up 35% of your credit score, so this is vital to healthy credit. If you struggle to make payments on time, look to see if your financial institution offers an automatic bill payment system. This way, even if you forget to pay a bill, the automatic bill payment service has your back. Here at Central National Bank, we offer Bill Pay that allows for automatic payments and tracking, and you can make recurring or one-time payments..  If you are worried about insufficient funds, you can also start a budget to help manage your money more responsibly. Check out MoneyCentral, our service that you can set up a budget and stick to it with email alerts.

  • Take care of old debts

Let’s say that you have outstanding debts, these are affecting your credit score as well. By paying these off, you can improve your payment history and lower your credit utilization ratio. Your utilization ratio is measured by comparing your credit card balances to your overall credit limit. Lenders will use this ratio to evaluate how well you manage debt, so a ratio that is greater than 0% but less than 30% is considered good. There are two ways to pay off debts that are recommended: the avalanche or the snowball method. The avalanche method suggest that you pay off your high interest cards first. Basically, you add up all the minimums you must pay and order them from highest to lowest. With the avalanche you would just look at the interest rate instead of the minimum payment. For example, you have a 8% car note with a $250 payment and a 22% credit card with a $35 payment, so you would star with the 22% payment first.   It’s a systematic way to pay down debt so that you can save money on interest; you work from high to low. The snowball method is where you pay off your smallest payments first. Like a snowball rolling down the hill, this method creates the momentum you may need to pay off those larger debts. For example, paying off the $500 payday loan before moving on to the $10,000 car note. Seeing the small victories in the beginning keep you motivated.

You may see a slight dip in your score at first when paying off a debt and closing that line of credit. This is because each credit line contributes to your credit history and older accounts contribute to a higher score. So, once you pay off that debt your length of credit diminishes. However, in the long run, it will help better your credit score.

  • Not “out with the old”

Forbes recommends that you keep your old credit cards open even after you have paid them off. Keeping them open helps you establish a long credit history, which is important because it makes up 15% of your credit score. Also, try to only apply for credit when you need it. Each time that you apply for credit, a hard inquiry is going to happen.

  • New beginnings, new opportunities

At Central National Bank, we offer a New Opportunity Checking account for when life doesn’t go as you planned it. We offer you a second chance at a first-class bank account that gives you access to banking services you may not find elsewhere. This account includes all the features of a traditional checking account with minimal fees and no minimum balance requirements. Plus, after a period with a limited number of overdrafts, you can graduate into a traditional checking account. It’s a great way to rebuild your banking history. To learn more, you can visit

Rebuilding your credit from the ground up may seem like a daunting task. Just remember that Rome wasn’t built in a day. Take one thing at a time, one bill at a time, and one debt payment at a time. We are here for you! Contact us if you have any questions, concerns, or just want some general information.

Stay golden and happy trails!


Started From the Bottom – How to Fix Your Credit
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