Debt is a a big concern for many of us. I have never met anyone who feels happy that he or she carries a lot of debt. If debt can be stressful, imagine the agony of having bad debts? People say that debt can make or break a person. So what if you have bad debts that ruined your credit history? What can you do?

The best solution to a debt problem is to pay those debts and never borrow again — but life is never that easy… I know, right?

Learn from past experiences – if only it were that easy in all situations. Remembering to walk your dog every day, so you can keep your home tidy is one thing; ruining your credit and having difficult applying for a new one is another level. When it comes to finances, be it your monthly income or your loan balance, all these instruments are related and affect one another. You have a high monthly income? Then you can loan a larger amount. You don’t have a credit history? Then you may be given a higher interest rate on a loan?

What about if your ruin your credit? What are the repercussions?

The following are the effects of having bad or ruined credit:

• You can have difficulty applying for multiple lines of credit, be it credit cards, loans, etc. (but it’s not impossible)
• You may have a hard time starting your own business (because banks check your credit history when you apply for a loan).
• You can be charged higher interest rates on these loans.
• You will spend more money through the years because of interest payments.

As mentioned above, the takeaway is to learn from past experiences. Now, that you know the disadvantages of having ruined credit, what can you do to fix that?

Here are 5 ways to repair your ruined credit history:

Build positive credit

You’re balancing credit card debt, a car loan, and a home loan. You may think your situation is hopeless, but think again. There are many others in your situation, but more than that, you can turn your situation around. If you want to improve your ruined credit, then don’t make the same mistake on other forms of credit. Your credit card history tanked because you forgot to make payments the past few months? Then, don’t let the same thing happen to your car and home loans. If you can pay more than the minimum amount on your loans, then do so. As mentioned above, your financial instruments are inter-related. Fix one, and it affects all others. Here are 5 ways to build positive credit:

• Apply for a variety of credit types, be it a home or car loan (provided that you make the regular payments)
• Be a supplementary credit card holder of your parent (but don’t take advantage of them)
• Don’t apply for multiple credits at once (it may show your dependence on credit)
• Pay your bills on time
• Start with a low amount (be it your credit limit or your loan value)

Go secured

Using secured credit cards is the best first step when it comes to credit management. This is because having a secured card requires you to make a deposit which will determine your credit limit. If you deposit Php 15,000, 80% of that, or Php 12,000, will be your credit limit. This gives the bank assurance that if you max out your credit card, you have the money to pay your balance because you made a deposit. The more you utilize your secured credit card, the more you are building your credit history, which helps in repairing your ruined credit.

Negotiate

Paying your credit card balance – it’s easier said than done. This is where the power of negotiation comes in. If you’ve wracked up debt, try to negotiate with your issuer a settlement of the amount you owe. When someone owes you money, you prefer that they pay you back regularly (and sooner than later) instead of waiting while they keep giving empty promises. The same works for financial institutions. If you have a large amount due, try to negotiate the following steps:

• Moving your due date near or on the same day as pay day
• Coming up with a long-term repayment plan both you and the borrower agree on
• Reducing your interest rates if you make a lump sum settlement payment
• Reducing the amount you owe with a lump sum settlement payment

Read and research

It always pays to do your research. Whether it’s choosing which bank to open a savings account or a credit card with. The same works for handling and managing your money, debts included. The internet is flooded with various resources you can use to help you figure out what you can do to repair your ruined credit. Read blogs tackling credit card. I’ve written about how to get out of credit card debt among many other.

Even further, it’s best to do your research even before you apply for any sort of financial instrument. Applying for a credit card? Search for institutions that offer the lowest interest rate, flexible payment plans, and the highest cashbacks among other features. Comparison portals, such as MoneyMax.ph, compile all this information into one platform which you can personalize and filter according to what you’re looking for.

Turn the above into habits

When it comes to your financial well-being, longevity counts. When applying for a credit card or a loan, institutions look at your credit history. The number of years you’ve owned a credit card is a plus point in your application. In the same way, practicing proper credit management will improve your ruined credit. Regularly paying down your loans and utilizing your credit card without going above your limit over a set period of time will improve your credit.

So how do you make sure that you won’t go back to your old ways? Turn your actions into habits. Whether it’s regularly negotiating the best deal or discount or reading finance-related articles every night before you go to sleep, if you make a habit out of the tips above, you’ll see your credit history improving over the long-term.

More than improving your credit history, practicing the tips above will trickle down to the other aspects of your financial life. You’ll learn how to manage your finances, value money, and be independent of debt among many others. As mentioned above – learn from past experiences – so once you improve your credit, keep it that way.

Remember,  credit is a privilege and not a right — be careful how to use or it will be big burden for you to carry for a long, long time.

The rich rules over the poor, and the borrower is the slave of the lender. – Proverbs 22:7, ESV