Single Mom with Bad Credit? Here’s How To Start Fixing It
Let’s face it — raising a family as a single mom is tough. You have to do it all: be the breadwinner, the cook, the housekeeper, the nurse, and the list goes on. But it’s even tougher when you have bad credit. Bad credit can make it hard to get a loan, rent an apartment, or even get a job. But it doesn’t have to be that way.
Table of Contents
- Monitor your credit
- Make a budget plan
- Set up a rainy day fund
- Consolidate credit
- Pay more than the minimum
- Reduce expenses
- Get financial help
- Make extra money
- Conclusion
The good news is that there are several steps you can take to start fixing your credit and get your life back on track. In this article, we’ll go over several ways for single moms to fix their bad credit.
Monitor your credit
The first step in improving your credit is actually knowing what your credit score is. You should keep an eye on your credit score so you can track the progress that you’re making over time.
There are several websites that you can use to pull your credit score for free. One website that we recommend is CreditKarma. CreditKarma is completely free to use and has a great user experience.
Not only does monitoring your credit score help you track your progress, but you’ll also be able to take notice of the negative marks on your credit report to see what caused your score to come down in the first place.
In addition, by monitoring your credit you can make sure there are no incorrect or erroneous dings on your credit score. Believe it or not, companies sometimes leave negative marks on your credit report by accident. If you notice a negative mark on your credit report that shouldn’t be there, you can request to have it removed. This can instantly boost your credit.
Make a budget plan
Tracking your spending is another critical step in getting your credit fixed. If you spend more than what you earn or spend wastefully, it can be almost impossible to improve your credit.
A budget plan will help you plan where your money has to go in order to sustain yourself. If you follow this plan, it’ll also help you prevent spending your money in places where you shouldn’t.
Don’t have a budget plan? It’s time to make one. Creating a budget can be daunting, but there are a number of resources available to help you. This free budget plan template can help you put together a basic budget so you can track your money coming in and going out on a monthly basis.
You can use a budgeting app to help keep track of your progress and to make sure you’re sticking to your plan.
Once you have a budget in place, it will be much easier to stay on track financially. In order to improve your credit, you must create a budget that allows you to have some excess savings at the end of the month. This will help you set up pay down your debt and set up a rainy day fund.
Set up a rainy day fund
A rainy day fund (or an emergency fund) is important for anyone but it’s especially important for a single mother. As the lone income in the household, it’s critical that you have some excess savings to pay for unexpected expenses that pop up. And trust me, they will pop up.
You never know when your car will suddenly break down, your air conditioning will fail, or one of a million other unexpected and costly events will happen. Without a rainy day fund, you may be forced to pull out a credit card to pay for these unexpected expenses. But if you’re already struggling with credit and trying to turn things around, then this can only make things worse.
In order to start building a rainy day fund, you should add it to your budget. Keep socking away money in your rainy day account, month after month, and don’t touch it unless it’s an emergency. Forget it even exists.
You should also open a separate bank account so that you can separate your rainy day funds from the rest of your money. This way you don’t accidentally dip into it for everyday expenses.
Even $50 a month can add up over time. If you can, try to put away more. Don’t stop putting money into your emergency fund until you have at least 3 months of your monthly expenses saved. This means that if you make $2,000 a month, your emergency account should be at least $6,000. You can even choose to go beyond this for an extra level of comfort.
Once you have 3 to 6 months of expenses saved, you’ll be better prepared for anything that comes up.
Consolidate credit
When you’re trying to improve your credit, consolidating your credit can make life easier and save you money. Consolidating credit means that you take all the different credit cards and loans that you currently have outstanding and combine them into one account.
This can help you keep track of exactly how much you owe and also means that you only have one monthly payment to remember. In addition, if your new account has a lower interest rate than your previous credit cards and loans, you’ll save money on interest.
There are a few different ways to consolidate your credit. You can take out a personal loan from a bank or credit union. Or, you can open a new credit card and transfer your balances to it.
If you decide to open a new credit card account in order to consolidate your other credit card balances to it, you can look for one with cash-back rewards. These rewards can help you pay off your debt faster by giving you a small amount of cash back on every purchase you make.
Pay more than the minimum
Paying at least the minimum balance on your credit cards ensures that you won’t make your credit much worse. But in order to improve your credit and your finances faster, you should try to pay more than the minimum.
This can help in many ways.
First, by paying more than the minimum you’re balance will go down faster and you’ll be one step closer to getting out of debt and eliminating this payment completely — which will allow you to put the money you would have used for your monthly credit card payment towards other things, like your rainy day fund.
Secondly, if you pay more than the minimum credit card balance due, the amount of interest that you’ll pay over time will be reduced. By reducing the amount of interest you pay over time, you’ll have more money in your pocket in the long run.
Lastly, by paying down your credit card balance faster, your credit card utilization rate (the amount of your outstanding credit limit that you’re currently using) will decline. Your credit score improves when your credit utilization goes down. So even if you’re far from paying off your cards completely, reducing your credit card utilization by paying off more than your minimum balance can still have a positive impact on your credit score.
In order to ensure that you can pay more than the minimum credit card bill every month, you should add it to your budget plan. Add up the total minimum monthly payments that you owe between all your cards and loans, and make sure to budget enough cash so that you can pay more than this amount every month. How much more? It depends on what you can afford, but if you can double the minimum monthly payment you’ll save a tremendous amount of money over time and you’ll be well on your way to fixing your credit.
Reduce expenses
Reducing your expenses is extremely important when trying to improve your credit and pay down debt. This is the part of fixing your finances that no one enjoys, but if you are disciplined and can follow through with it, you’ll put yourself in a much better position over time.
Look for ways in your everyday life where you can reduce costs without significantly reducing your quality of life.
For example, if you buy coffee at Starbucks every day, try making your own coffee at home. Instead of eating out, prepare your own food at home. If you see some new clothes or accessories that you love but don’t need, think about how great life will feel when your finances are in better shape and try to hold off on making the purchase (or buy less than what you normally would).
Another great way to reduce expenses is to audit the recurring charges on your credit cards and cancel any subscriptions that you don’t use or don’t use much.
Some of these expenses may seem insignificant. You may even think to yourself “how does passing on a $4 cup of coffee fix my credit?”
But the truth is, these small savings add up and will allow you to put more money towards your debt repayment and your rainy day fund when making your monthly budget.
Reducing your expenses, especially as a single mother who’s already on a tight budget can be a challenging task, but every dollar that you save can go a long way in paying down debt and getting you where you want to be.
Get financial help
When it comes to paying down debt and improving credit, every dollar matters. If you’re struggling to make ends meet and using credit cards just to pay basic living expenses, then there may be help available for you.
There are many state and federal programs that offer grants and assistance for single moms with low incomes.
One such program is the Supplemental Nutrition Assistance Program, or SNAP, which gives qualifying families an EBT card that they can use to pay for food at groceries. Another great program for single moms is Head Start, which provides free childcare for children up to 5 years old.
Make sure to look into these programs and see which ones you qualify for. They were designed to help struggling individuals get their life and their finances back on track, so make sure to take advantage of them.
Make extra money
If there’s one recurring theme in any of the previous sections, it’s that in order to improve your credit you must find ways to put away extra money every month to save for emergencies and pay down existing debt.
After cutting back on expenses, you should be able to put away some money every month to help you get your finances back on track. But putting away even more money every month will help you get there faster. The simplest way to do this is by making more money.
If you’re already working a job, you can look for part-time gigs or work-from-home opportunities that will allow you to work extra hours on your own schedule. Any extra money you earn from these jobs should be put directly towards your rainy day fund and your debt repayment budget on your monthly budget plan.
Conclusion
If you’re a single mom that’s looking to improve your credit, the steps outlined here will definitely help you get on the right track. While some of the recommendations may feel like a grind, especially if you’re exhausted from raising your child and working your day job, you’ll thank yourself in the long run when your finances are improved and you and your little one are living the life that you deserve.
