How to Fix Credit Problems Other Than Filing Bankruptcy

Many people with credit problems and outstanding debt think there is no way out but to declare bankruptcy and potentially ruin their credit. However, options are available that will help a person reduce debt and payments without filing for bankruptcy. Fixing credit problems takes time, sacrifice and perseverance. But the peace of mind that comes with getting out of debt and becoming financially secure is worth the effort.

Instructions

1

Create a workable budget. Many people overlook this simple but crucial step toward fixing credit or debt problems. List all incoming and outgoing income, then cut down on non-necessities. Take a good look at where every dollar goes, then decide what extras you can do without.

2

Pay extra on high-interest lines of credit first. Any money left over in a budget should go toward two things: putting a small amount each pay period into savings and applying as much as possible toward high-interest debt. Once you've budgeted how much extra you can pay each month, treat that extra payment as a new bill. After the first debt is paid, start using that extra payment for the debt with the next-highest interest rate. Progressively work your way toward becoming debt-free and getting a better credit rating.

3

Negotiate with creditors. Sometimes, no matter how much you crunch the numbers, you may find yourself short on cash. This is the time to talk with creditors and explain how much you're able to pay. Make it clear that you are doing all you can to work with them. Creditors are in the business of making money; they don't want you to declare bankruptcy either. Most lenders will agree to a workable plan if you explain your limited options.

4

Choose a bank loan when considering debt consolidation. If you have debt with a high interest rate, apply at your bank for a lower-interest consolidation loan. Most banks will work with you as long as they understand that you're not taking on additional debt, just transferring it to them.

5

If you don't need it, close it. If person is following a budget wisely, there's no need for multiple credit cards or open lines of credit. One or two credit cards are more than adequate for necessities and emergency situations. It's too easy to overspend if the credit is available. Once a card is paid off, reward yourself by closing the account and cutting up the card.

6

Get counseling. The law requires individuals filing for bankruptcy to get credit or financial counseling. You may as well reap the benefits of counseling to avoid bankruptcy altogether. Credit counselors will work with you to create a budget and even contact creditors to work out better rates and lower monthly payments.