Repairing your credit after financial hardship does not happen overnight. The process is slow, requiring diligence and dedication to your repayment plan or budget. Fortunately, there are several tools you may employ to assist you in the credit rebuilding process. These tools can be useful aids to show your creditors you can handle credit responsibly.
Reponsible Money Management
The greatest tool to repairing your bad credit is your determination to adjust the spending habits that landed you in this situation. Responsible money management involves living within your means, making timely payments to your existing accounts, making more than the minimum payment on these accounts and only using available credit to purchase what you can afford to pay off at the end of the month. These actions work to bring your credit balances down and help repair your credit by showing your creditors you are using responsible spending habits.
Credit Card Accounts
A credit card can be a useful tool in repairing your credit after a bankruptcy or divorce. According to Bank Rate's website, your credit may not be healthy enough to obtain an unsecured card. A secured credit card offers the same spending ability of an unsecured card but requires a down payment to open the account. The fee can range upward of $300, depending on the issuing card company. Fortunately, you can begin rebuilding your credit with just one card as long as you keep the revolving balance at zero and only spend what you can afford to pay off each month.
Debt Management Plan
A debt management plan created by a licensed debt management company may be a smart way to steadily pay off your debt while repairing your credit. A debt management company can negotiate for lower interest rates on your credit accounts and setup a structured payment plan designed to eliminate your debt. Creditors may note on your file that you are participating in a debt management plan, but this notification does not have an adverse affect on your credit rating. It's important to only use the services of a properly licensed debt management company to avoid a possible scam, which could worsen your financial situation.
Know Your Rights
The Fair Credit Reporting Act grants you the right to contest any item contained in your credit report. If you have damaging items on your credit report which you believe are incorrect, repairing your credit begins with contacting the credit reporting bureau showing the false information. The credit bureau is required to investigate the validity of the debt and immediately remove the information if proven false. You are also entitled to a free copy for your credit report once every 12 months.
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