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How to Repair Your Credit
If you're struggling with debt, here are few steps you can take to repair or
rebuild your credit on your own before accepting one of the many "debt
consolidation" offers or resorting to bankruptcy.
Steps
1. Create a budget. Calculate your income and your expenditures. Figure in your
bills such as car and house payments, utilities, and other bills that you can't
be late on. Find out how much money is going to waste for leisure activities and
going out to eat. Then figure out how much money you can set aside each month to
whittle down your debt. There is a lot of free budgeting software out there, just look.
2. Be aware of what's in your credit report. Surf the web for the latest free
offers, but read the fine print. Some "free" offers automatically enroll you in
a monthly or annual program that costs money. Or, visit this site to get a free
copy of your credit report from
Equifax,
Experian, and/or
Trans Union.
3. Contact your creditors. Not after months of harassing calls, but as soon as
you realize you won't be able to make the requested payments. Most creditors are
not as cut-throat as you think, and they will work with you to schedule smaller
payments that fit your budget.
Look at it from their point of view. They'd much rather receive $20 payments for
the next year than get nothing if you have to file for bankruptcy. Let them know
you're trying to repair your credit, and offer to pay them a percentage of your
balance. Most agencies will accept 30 – 40 percent of your debt.
4. Get any agreement in writing. Once you pay off your debt, make sure you get a
settlement letter and send it to the credit bureaus so they can amend your credit report.
5. Cut up the cards. Keep a few of the accounts open. Having 5 accounts with
zero balance on four and $500 on one lowers your credit risk, as opposed to 2
accounts with a $250 balance each.
6. Get a secured credit card. You're unlikely to be turned down for one because
you supply the money up front as a collateral. For instance, you pay $300 for a
secured card, you'll have $300 credit limit. Beware of the high interest rate
and various fees often associated with a secured card.
7. Join a credit union. They're more likely to give you loans in the future than a regular bank.
8. Make all payments on time. Don't arrange a lowered settlement amount if you
can't pay it. Don't get a secured credit card if you won't be able to make those
payments on time. It will only reflect badly on your credit.
9. Recognize that bankruptcy shows up on your credit for 10 years. Don't take
the easy way out now, you'll pay for it later. It takes a lot more hard work and
dedication to rebuild your credit than it does to declare bankruptcy, but you'll
be glad you did.
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