The Top Dos and Don'ts when You Have Poor Credit ...

So, what are some dos and don'ts when you have poor credit? For starters, don't apply for new financing. Getting a secured credit card can help build your credit score. But with regard to an auto loan or a mortgage loan, avoid these types of financing, if possible. Because of bad credit, you'll receive a much higher interest rate than someone with good credit. This results in a higher monthly payment which might strain your budget. It's best to pay cash for now, and get financing once your credit score improves.

Sometimes, poor credit results from situations beyond our control. But if you have bad credit because you've made unwise decisions, don't make excuses or justify your actions. Acknowledge your mistakes and develop a strategy to improve your low score. This might include destroying any credit cards to avoid accumulating more debt, or communicating with your creditors when you're going to be late paying a bill.

If you have poor credit, you might look for a cosigner. However, getting a cosigner puts another person's credit at risk. Even if the person is willing to help, you need to seriously consider whether you can manage payments. If not, the creditor will come after the person for payment, and if you default, negative activity will appear on their credit report and damage their credit score.

Bad credit is fixable, but to improve your situation, you'll need to pay your bills on time every month. If you're going to be late, call your credit card company immediately and ask for a payment extension. To ensure a timely arrival, mail bills at least a week before the due date, or sign up for online account management and submit payment online on or before your due date.

Too much consumer debt can also damage your credit score. Therefore, develop a strategy to pay off balances – whether it's credit cards or loans. You can start by paying more than the minimum payment every month. Also, make higher payments whenever you receive free money, such as a tax refund. You'll need to avoid new charges, and pay statements on time to avoid late fees.

If you have a plan in place to improve your credit score, be patient. Unfortunately, you can't raise a low score overnight. Even if you make better decisions, it can take between six months and 12 months to rebuild a low score. If you continue to make timely payments and reduce your debt, your score may start to increase within a couple of months.

Check your credit report at least once a year. Sometimes, errors on your report lower your credit score. If you dispute errors, and the bureaus or creditors delete negative information from your file, your credit score may increase. Get your free report at AnnualCreditReport.com.

Bad credit may prevent a loan approval, and it can trigger higher insurance premiums and affect employment options. But if you recognize your mistakes, you can rebuild your score. What are other dos and don'ts when you have poor credit?