Bad Credit

Hello All, I am struggling with a bad credit score for home loan and car loan. Can someone help me with this or atleast guide me because my loan application is getting rejected from everywhere.

Shaun, welcome to the forum.

I am sorry to hear that your credit application is being turned down.

I would suggest building your credit score first.

Occasionally, I get credit card applications in the mail.  

I like to pay cash though having credit cards that you faithfully pay on time each month helps build your credit.

I hope this helps and that you will ask more questions if you are unsure of what I am suggesting.

Hi Shaun,

Welcome to Permies!

I’ll assume you’re in the US. I moved here two and a bit years ago and had zero credit score because I had no history. I appreciate, that’s different to having Bad Credit. I had lived in the UK previously where I had a huge amount of debt and had to sell pretty much everything. I learnt a lot of hard lessons.

I don’t have a fix but I will share the one thing that made sure I never slipped back into debt.

I found a different way of knowing how much I was spending, what I was spending it on and most importantly, having a budget. Finding out where your money has gone is easy - you just need to start a spreadhseet and record everything. Budgetting is much harder and when I started out, there was only one product on the market - YNAB (You need a budget) https://www.youneedabudget.com. They have a huge amount of information which is available for free. I could write a pages of advice but YNAB have already done this - with their four rules. This worked for me. Start by reading and understanding the four rules. They also have a very active forum and there but you won’t get advice on how it ties in with a homestead / permie lifestyle.

There’s more about credit ratings here: https://permies.com/t/9007/credit-rating-means-chump-rating

And starting from absolute zero here : https://permies.com/t/39051/Starting-Absolute

Good luck - you’ve taken the first step which can be the hardest

Shaun,  the first thing you need to do is get a free copy of your credit report from at least one of the big three credit reporting agencies.  Transunion, Equifax, and Experian.  Follow the instructions here.  FTC

When you get it, look it over carefully for any incorrect information.  You may find accounts that you still owe money to.  You may find incorrect mailing addresses for you.  There are many factors that can contribute to a low score and having a credit record that is full of incorrect data and inconsistencies is one of them.

After you've had a chance to make any necessary corrections, and have contacted anyone who is still reporting uncollected debt on you and made arrangements to pay, if there be any, then you are in a position to begin building your credit.  Start with a secured credit card such as one of these.  secured cards
They are almost guaranteed to approve you and report to all three credit agencies like regular credit cards.  

In time you will be able to open other credit accounts with department stores, other credit card companies, car loans.

Just use the card/s for essentials and be sure to pay off the balance every month.  This is the most sure fire way to build your credit.  The more accounts you have and the longer you have kept them current is what builds your credit score points.  What they want to see is someone with a lot of accounts who has them all paid off.  That means you have a low debt to earnings ratio.

It takes time, but be  patient, be diligent, and eventually you will make the credit system work for you.  Take it from a guy who filed for bankruptcy once and said "Never again!"

Good luck!