Credit Repair for Variable Income: Is It Possible?

Millions of Americans live with the stress of variable income. Freelancers, small business owners, and seasonal workers all understand the fear that arises when cash flow is unsteady. If you are struggling with credit repair, it may seem impossible to improve your situation. After all, how are you supposed to pay off debt when next month’s paycheck is a mystery? Good news: Despite the X-factors, there are ways to safely improve your finances. Begin by following the suggestions below. They will help you establish a plan and keep your life running smoothly.

Step 1: Build a budget.

Your life cannot function without a solid budget. Even those with the steadiest of incomes rely on a budget to guide their spending. Make a list of your expenses and look for ways to reduce excess spending. Remind yourself of these financial commitments by hanging a copy of your budget in a highly-visible location.

Step 2: Consider credit repair as a bill.

Credit repair goals are never accomplished without motivation. View your credit repair efforts as a monthly expense. For example, while your credit card minimum payment may be $50.00, increasing the amount to $75.00 or more will help you pay down the balance more quickly. Implement your thinking into the budget and allow consistency to help you along the way.

Step 3: Allocate and save.

Variable income has its obvious ups and downs. While March may have treated you well, April may have put your bank account into a slump. Temper the sting of low-earning months by saving money whenever possible. Use the profits from March to establish an emergency fund. If your bank account is healthy, consider paying fixed expenses such as rent or car payments ahead of time to get them off your plate. The bottom line: Safety is not possible without savings. Focus on credit repair by making smart decisions.

Step 4: Anticipate slumps.

Expenses are easier to manage if you anticipate income slumps. Consider the following example:

Chad is a construction worker who has trouble finding employment in the winter months. With the frost fast-approaching, Chad cuts his expenses by eating at home more often, downgrading his cable package, and splitting his rent with a new roommate.

When it comes to variable income, your expenses may need to ebb and flow with your paycheck. Reduce your burden to account for lost wages.

Step 5: Put the credit cards away.

Sure, a dwindling bank account can cause panic. You may even consider living off credit for a while. If this is your plan, consider it the beginning of the end. Not only will this path plunge you into debt, it will affect your credit utilization ratio and your credit score by extension. The result? Bigger burdens and increased stress. Credit cards should never be used as income. If you are having trouble making ends meet, consider reducing your costs or taking a part-time job until your career regains momentum. Relying on credit is never the answer.