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Rebuilding damaged credit requires effort,
persistence and a plan. You will need to do two things. First
you will need to deal with the debt you already have. Secondly
you will prepare yourself to avoid the same situation that
caused your current financial crisis.
Look at your Credit Reports.
Check your credit reports for accuracy. Report any errors
immediately. Errors can be removed but be aware that there is no
way to remove truthful information. You can purchase an
Equifax 3-in-1 Credit Report for less than $30.
Prepare a budget.
A budget is nothing more than a plan. Where does my money come
from and where does it go? A budget puts you in control of your
money. Be realistic as to what you can afford and what you need.
Then put your budget into motion, fine tune it and make it a
part of your life.
Contact and repay past creditors.
Delayed repayment is much better than having past due
outstanding debt on your credit reports. Contact your creditors,
explain why you are having trouble paying them and set up a
repayment schedule that you can stick to and that they can
accept. You will probably be surprised how helpful they will be.
Do not take on additional debt.
Your focus should be entirely on paying down your debt load. You
already have bad credit. Don't make it worse.
Consider getting a second job to help pay
off your debts.
A second job can shorten the repayment period and the amount
of time under stress.
Do not make purchases just to rebuild
credit worthiness.
Purchase necessities when the need arises and other items you
want when you can afford them.
Be patient.
It takes up to 10 years for a bankruptcy to disappear from your
credit report and up to 7 years for other negative information
to be deleted. It will likely take time to get your old debts
repaid. It's time well spent when the result is a stronger
financial future.
Don't fall for a scam.
There are companies which promise to clean up your credit report
for an up front fee. There is no way to remove truthful
information from your credit report. There is no legal way to
create a "new" credit identity. More than likely these companies
will take your money and disappear.
Consider a secured credit card.
Secured cards
are a good way to rebuild credit. They have all the
functionality and usefulness of their unsecured cousins and
using them responsibly lets potential lenders know that you are
serious about properly managing your finances.
Choose a debt counselor if you can't do it
on your own.
Look for a non profit firm. Nonprofits get most of their funding
from creditors. There will probably be a fee, but it will be
reasonable. Make sure that you know what services you are
getting before you sign up. Legitimate debt counselors will help
you negotiate repayment schedules with your creditors and set up
a budget you can live within. Check with the Better Business
Bureau or the
National Foundation for Credit Counseling.
Our Assessment
Consumers who have experiences a financial crisis are not
alone. They should try not to get discouraged. It is possible to
overcome a financial crisis by being realistic and proactive.
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