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Navigating Your Credit Score: From Bad to Brilliant (and Tackling Medical Debt)
Understanding your credit score and managing debt can feel like navigating a complex maze. Many people wonder: is it worse to have bad credit or no credit at all? The consensus among financial experts, and reiterated on The Grind It Up Podcast, is that having **no credit** is often more difficult than having bad credit. Why? Because with no credit, there’s no history for lenders to evaluate, making it harder to get approved for loans or credit lines. Bad credit, on the other hand, at least provides a history, which can be improved.
Transforming Bad Credit into Good Credit
If you have bad credit, there are actionable steps you can take to improve it. The key lies in understanding what impacts your score and strategically addressing those factors:
- Credit Utilization: This is a major factor. Keeping your credit utilization low (ideally below 30%) can significantly boost your score. Even making changes here can bring your score up by as much as 80 points.
- Collections: As soon as an account goes to collections, it’s crucial to address it. Getting rid of collections is a priority.
- Late Payments: Avoiding late payments is fundamental. Consistent on-time payments build a positive payment history, which is a cornerstone of a good credit score.
By focusing on these areas, you can see substantial improvements. It’s not uncommon for scores to jump 100-180 points once these issues are resolved.
Secured Credit Cards and Alternatives
For those with no credit or very poor credit, secured credit cards are often suggested. While they can work to build credit, they sometimes require a significant deposit (e.g., $200). Alternatives like Ava, which might only require a $94 payment, can offer a better starting point with a $500 credit limit in as little as 21 days, potentially offering a quicker and more affordable path to establishing credit history.
Conquering Medical Debt
Medical debt is a growing concern, especially with changes in protection policies. If you’re dealing with medical debt, the advice is clear: as soon as it hits collections, get on top of it. This is where professional help can be invaluable.
- Collections vs. Court Orders: The distinction is vital. If medical debt is in collections, it can often be disputed effectively. The strategy is to
This info can be found in this episode of The Grind It Up Podcast
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