Bad credit is not your problem. Bad credit is a symptom, and a result, of your bad behavior with money.
Don’t waste time cleaning up your credit until you first spend time changing your mind, and your behavior that caused your bad credit. Managing money is simple, but human beings tend to complicate money and give money a bad name! You have to change how you think about money, how you think about consumerism, how you feel about material stuff, and then after all of this – work on your credit. I've seen people make poor decisions with money, fix their credit, and turn right back around 10 years later, and be right back in a worse mess financially. It's because if you work on the symptom and ignore the problem, you've only put a Band-Aid on a larger real issue.
For most of us, our credit is the least of our worries. If you change your attitude and behavior with money, your credit score will get better, but if you ignore the behavior and work on the credit score only, you will lose over and over again. Sounds simple, but this mis-directed approach happens all the time. Keep in mind that there is not an even correlation between fixing your credit score and better behavior with money. The focus should be on raising the behavior first, and as the better mind frame and behavior takes shape and plays itself out, the credit score will likely rise on its own, and change permanently. But it's not your credit score that deserves the attention and the focus, it's the bad behavior that led to the bad credit score in the first place.
Let’s clear something up:
First, a good credit score, in its simplest definition, means you borrow money and you pay it back. A good credit score doesn’t mean you are a good person, a nice person, a loving person, or a righteous person. Your credit score doesn’t have anything to do with whether or not you get into heaven. God doesn’t like people with good credit scores better than people with bad scores. You are not a horrible person if you have a low credit score and the bank won’t give you a loan. I realize that banks tend to want to tie your quality as an individual to your credit score, and we follow suit by looking down on people with bad scores.
Unfortunately people have a tendency to equate being able to purchase an item “on credit” with status, self-worth, prestige, etc. Please don’t do this. Save yourself that misery and realize this one fact: Credit is a lending institutions view of your ability to pay them back their money that they loaned to you based a number of factors that go beyond the scope of this post. But everyone makes mistakes and poor decisions with money has happened to many of us. Your circumstances, life problems, life issues, mistakes in the past, and future greatness, is never taken into consideration when getting a loan. They put your life on a few pieces of paper, and look at your past, your current, and then try to predict the future of how you are going to pay them back. Period. That's it. It's not a measure of your integrity, but a measure of whether or not you made good decisions in the past with money, or paid lending institutions back in the past with money. The credit bureaus are not God, so don’t treat them like they are God. They can only judge you based on a past. They don't know you as a human, but as what's on a piece of paper from your past. We have to get away from this idea that our identity is our credit score. It's not. Don’t worship the credit bureaus, or the scores they assign to you. Take it for what it is and move on.
Secondly, you only need good credit to buy more stuff on credit. You must realize that there is no other need for credit, other than to show and prove to banks and lending institutions that you are worthy of them giving you more credit so that you can now go and buy more stuff that you don't need, using more credit! And so on, and so on. It’s a cycle and you get thrown right in the middle of it as the primary engine that keeps the fiat banking system going.
There are 2 behaviors that you must change today, before you worry about what your credit score is:
1. Stop borrowing money you don’t have. Literally, practice this: if you don’t have it in cash, don’t buy it. Sounds simple, but the small things make the biggest difference. This is a mindset that effects and directs your behavior. if you control the part of your brain that handles transactions with cash, it changes your behavior with money. This one step alone will combat a spending culture that has a death grip on many of us that makes us think we deserve stuff just for breathing and being over a certain age. That it the type of mindset that will have you flat broke with low credit scores. It's ok to practice some patience, save up for it, and purchase it when you have green cash in your pocket. And no, you don't have to have alot of positive credit to buy a house. Have a sizeable down payment, the right incomes, target a house you can easily afford based on the right ratios, and underwriting at lending institutions will make a way. No, I'm not saying you can buy a house with BAD credit. I'm saying you don't need loads of positive credit to buy a house.
2. Take complete control of your money by telling your dollars what to do, when to do, how to do, and where to do. You put your money where you want it to go, not where it tells you it wants to go. Develop a budget, plan it out, and stick to it no matter what. Hold your money accountable to you. One way to take complete control of your money is to focus intently on getting out of debt. Frees up money, and gives you charge over your finances!
The bottom line is this: Fix your mindset, fix your behavior, and then consider fixing your credit. It is altogether likely that once you fix your behavior with money, the credit will be in the process of fixing itself! But do not do these in reverse order, or you will find yourself back in trouble. Learn to think like an investor, not like a consumer. After you change how you think, how you behave, and how you feel about money, then you can confidently work on cleaning up your credit score. But don’t clean it to use it. Instead clean it just as simply a responsible act as an adult who cares about your name and your financial reputation. The right thing to do is pay your debts on time, pay your bills on time, and be a person of your word who follows up with what they said they will follow up with.
Spend time on you before your thoughts, behavior, and habits with money, and then spend time on worrying about your credit.