Many people find themselves saddled with bad credit for one reason or another. Fortunately you can always fix your credit in time, even if you've been forced to go into bankruptcy. You will need to have a sound plan for managing your future use of credit and to keep track of your credit history to ensure accuracy. You may need assistance to resolve issues and answer questions. Don't hesitate to ask for help if you need it. Many credit problems can be fixed if you learn how or get expert help.
Developing a Credit Management Plan
Whatever else you do, ultimately the key to fixing your credit is to develop an effective plan to manage your use of credit. The first priority is to bring all your credit accounts up to date and then make timely payments. Then start reducing your total debt if it is excessive for your income, especially unsecured debt such as credit card balances. These are the two areas that lenders look at most in evaluating your risk as a potential borrower and they account for 65 percent of your credit score.
If you have trouble meeting your existing debt obligations each month, consider getting a debt consolidation loan. These loans reduce payments to help you better cope with your current situation. You may be able to get interest rates lowered so more of your payments go to paying off the balance, putting you on the road to reducing your total debt.
In the short-term, you can make a quick start repairing your credit by eliminating excess available credit. For example, if you have a credit card with a $750 balance and a $2,500 limit, call the lender and request that the limit be lowered. Minimizing unused credit lines in this way helps your credit, because it lessens the credit risk you present. Simply put, if the credit line isn't there to use, you can't use it, which makes you a better risk.
Monitoring Your Credit
Keeping track of your credit history is important, because incorrect information can hurt your credit rating. Fortunately you have the right under the Fair Credit Reporting Act to see your credit history and to dispute any information you believe is erroneous. You are entitled to a free copy of your credit report from each of the major credit bureaus once a year. You can place the order online with the Federal Trade Commission's authorized provider, AnnualCreditReports.com (see link in Resources) or by calling toll free (877) 322-8228.
You've probably seen ads that promise to get negative items removed from your credit history. Often consumers are misled into believing negative items can simply be deleted, which is not the case. The credit bureaus may not legally remove accurate information for a specific period of time (how long depends on the type of information). You can have errors corrected by initiating a dispute. To do this, go to the individual credit bureau website (Equifax.com, TransUnion.com or Experian.com) and use the online tools they provide. If you need assistance in resolving a problem, you can get it through a consumer credit counseling agency at no cost.
Getting Real Help
Many credit problems can be resolved if you learn how or get help from someone who does. One strategy is to contact a creditor directly using the company's customer service number. Most lenders will work with you and even make special arrangements to bring a past-due bill up to date. Provided you follow through with such agreements, many lenders will not report a late payment to the credit bureaus. It's best to ask to speak to a supervisor who has the authority to make such arrangements.
Credit counseling is another avenue to get assistance and one that is available free through nonprofit networks. Counselors can help you negotiate with creditors, arrange debt consolidation loans and advise you on managing your credit to avoid future problems. The two major nonprofit credit counseling organizations are Consumer Credit Counseling Services at (888)-656-2227 and the National Foundation for Credit Counseling at (800) 388-2227. You can also contact either online by using the links in Resources.
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