How to Make a Budget & Fix Credit

A poor credit score can make it difficult to borrow money and may affect your ability to find a job in certain fields. Poor credit usually happens as a result of poor money management skills, which can cause you to fall behind on payments. A budget will help you gain control of your money and make it easier to repair your poor credit history.

Instructions

Make a Budget

1

List your monthly expenses. Look at receipts from the last three months to find the average amount you spend on a monthly basis to get a starting amount for your budget. Your expenses should include rent, utilities, car expenses, entertainment, food, clothing and savings.

2

Add up your expenses and subtract that number from your income. If the number is positive you are in a good position. If the number is negative you will need to cut your expenses until the number is zero or positive. A positive number will give you money to work toward fixing your credit.

3

Track your expenses through the month. Subtract money from each category as you spend it and stop spending the money as you run out of money in each category. You can transfer money from another category to cover expenses if you find that you have overspent on groceries and run out of food.

4

Adjust your budget after the first few months. It will take time to work out the right amount for each category and you may find that you always have money left over in one category, but consistently overspend in another. After a few months you can change the amounts so the budget works well.

Fix Credit

5

Create a debt payment plan to pay off your current debts. Using your most recent credit card bills, list your debts from the highest interest rate to the lowest interest rate and pay any extra money on the first debt in your list.

6

Get caught up on current accounts and stay current with those debts. Your most recent credit history will be the one that potential lenders and employers look at closely. Staying current on all of your payments will help build a favorable credit history.

7

Compile a list of your old debts, using the past-due statements for your accounts. You can also pull a copy of your credit report to make sure you have not forgotten any outstanding debts. Begin saving money to pay off the debts one at a time. You can settle an old debt by offering a lower amount to the creditor if you have missed payments for several years. However, paid in full looks better on your credit report than debt settled, and you can repair your score more quickly if you can simply pay off all of the debts. However, even settled debts are better than outstanding debts.