How to Improve Your Bad Credit and Deal With Your Bad Debt

When you want to start a business, you have to know that not with all kinds of businesses you will need to get a business loan. With this advancing technology and creative era and age of social media and internet, you really don’t need lots of money to start a business. Often what you will need is Wi-Fi and a little bit of money to outsource some of the services you may need to get your business running.

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If you can, avoid completely getting a business loan and avoid owing anyone, and just starting with the resources you have on hand. You can start slowly with what you have and work on your way up. Be more creative, innovative, and resourceful.

This is because some people would get into debt that they can’t pay, or have difficulty in paying back, and ended up putting themselves in bad credit, and financial difficulty situations, because they thought they needed business loans to start and grow their businesses. There are a lot of other factors can cause a business to fail, and not all of the time they have to do with shortage of funding.

Don’t get me wrong, not all debts are bad even though there can be a good and a bad debt. One example of a good debt is when you borrow money to buy something that will increase in value and generate more income. When you borrow money to buy an investment property for instance that has potential to increase much more in value for you over a period of time and maybe generate monthly rental income for you that is considered a good debt.

A bad debt is a debt that you know or you don’t have a guarantee that will earn you any income, and also is not tax deductible. So when you borrow money or using your credit card to buy more bunches of shoes and clothes that will only end up catching dust and go out of style anyway that is considered to be a bad debt and a bad money behavior.

Depending on the nature of your business and the industry you are involving in, a business loan can end up being a good or bad debt if not properly used and monetized. But usually business loans are considered to be good debts because there is a potential to generate more income.

Many of us especially when we were young we didn’t know better, so out of our ignorance we put ourselves in bad positions that have caused us to be really affected by bad debts and credits. I remember when I was in my early twenties how I used to hate my phone….hahaha. I had debt collectors looking for me every day; it was crazy. I had credit cards debts that reached to maximum with high interest charges. I mean, it was terrible. There were times I couldn’t even pay minimum payments; it was that bad.

I remember how it felt when I was able to get my first credit card. And the whole point is that I wanted to build my credit up over time so that I could have a good credit later on as I grow up to be able to get all the things you can get if you have a good credit in my near future such as a mortgage, a business loan, and so on. I heard that if you wanted to build your credit, you need to get a credit card, or have some kind of a bill payment that you will be consistently paying. So I took the advice. But how many of you know that it is too tempting for someone young and inexperienced to have credit cards with full balances. I didn’t have lots of income coming in, and my money behaviors were terrible. I also was not in control of my spending after I got my credit cards. When I got my first one I was excited, and then I got another, and I said this-is-sweet, hahaha. And I used my credit cards to live a lavishly lifestyle I couldn’t afford. I bought more shoes and clothes, and other unimportant things. In few years I got myself in a mess situation and ended up putting myself in serious financial difficulties.

I mean you may think having a bad credit is not a serious issue, it actually is. It does not only affect your financial situation, but your entire life areas. It can affect your emotional well-being. It can even affect your relationships. There are a lot of relationship breakups because of bad money behaviors. There are people who will not getting into serious and long-term relationship with you if they find you have a bad credit or you have so many debts. Eventually your debts and bad credit are going to affect them too when you get married for instance, therefore they are afraid of what are they going to put themselves into.

So I have five tips that can help you deal with your bad debts but also help you improve your bad credit.

  • The soil does affect the seed

There are a lot of people who their problems are not because they are earning less income, but even with them being able to earn lots of money, at the end of the month, they end up back to zero balance. The more they earn, the more they spend. You need to improve your behavior towards money and how you spend it. Improve your relationship with money. Usually your personal finances may reflect on how you will handle your business for instance. In order to be able to get a good debt for instance, mortgage lenders, business institutions, banks, and people who may be able to lend you money they want to be able to see that you have a good relationship with money. You can’t just be spending on everything you set your eyes into. So you need to improve your money behaviors. It is very important for your financial wellness. You can start by reading books or articles, and listening to podcasts about money management and money healthy habits to prepare and help you mentally so when meet with setbacks you know what to do. You need to stay in control of your spending.

Check out <<<Healthy Money Habits to Adopt; Ready to Clear Your Money Blocks?; Frugal Lifestyle: How to Improve Your Budget and Save More>>> Continue reading “How to Improve Your Bad Credit and Deal With Your Bad Debt”