The number one issue of the times we live in is credit card debt. You may have lived on credit cards for years, perhaps borrowing from Peter to pay Paul. Your credit cards may be maxed out, and you're now wondering how you're going to live from day to day, how to keep your home from foreclosure or your car from being repossessed.
The ten steps below are just the first path you'll need to take to rectify your current situation. Repair your credit first - and then make a plan for the future.
1. Commit yourself. Now, it's time to face reality. You may have to give up your current and comfortable lifestyle while you repair your credit. You may need to learn how to live on a cash-only basis for awhile.
2. Formulate a plan. Before you begin the odyssey of repairing your credit, you and your spouse (if applicable) should agree on the plan of attack. It simply won't work if one agrees on how to spend money and the other adamantly disagrees. You may have to compro mise - but just be sure that in the end you have a plan that works to clean up your credit.
3. Get your credit reports. Credit reports are free! Don't fall for online groups that promise to send your credit report for free and ask you for a payment later on. You can get your own credit report(s) by going directly to the three main credit reporting agencies - Equifax, Trans Union Corp., and Experion. You may also order all three credit reports once a year through annualcreditreport.com. You should receive credit reports from the three companies in a matter of days. Then, you can go over them with a fine-tooth comb to see where there might be errors.
4. Clear up mistakes on your credit reports. Look for errors or obsolete items on your reports. It's easy to clear them yourself. Gather all the information you have about the mistake(s) and write a letter to the credit bureau explaining why you think there's an error in the report. The credit bureau will then look int o the mistake, correct it and remove any information they can't prove . This is a free service to you.
5. Begin to pay off credit cards. This may be the most difficult step in repairing your credit, especially if you've lost your job but still have the same bills to pay. The best thing you can do now is to be proactive with the creditors. Call each one and tell the truth about your situation. Some will negotiate with you, offering reduced payments and flexible payment schedules. If your account has already been sent to a collection agency, call them and attempt to negotiate a reduced settlement.
6. Close credit card accounts. You have to be very cautious when closing credit card accounts. Sometimes it can negatively affect your credit reports. Close out accounts where you have the least credit history, and pay them off slowly. Be sure that the accounts you've closed are reflected on your credit reports as "closed by consumer."
7. Work on your credit reports. Even if you've filed bankruptcy, there are things you can do to rebui ld your credit - here are some guidelines:
Get a secured credit card. You'll give the lending institution a certain amount of money (for example, $1,000) to secure the card and they'll give you a credit card to use, with a limit up to the secured amount.
Open a savings account. If creditors see that you're saving money rather than spending your last dime and living on the edge, they'll be more apt to lend you money.
Make payments on time. Now is the time to be absolutely bullish about being on time with payments and ruthlessly monitoring your credit reports.
8. Consider credit counseling. Reputable credit counseling services can help you clear up a credit report and be a go-between with credit card companies and loan institutions. Find a reputable credit repair agency by calling your Better Business Bureau.
9. Beware of credit repair scams. If you have severe credit problems, you may be tempted to take advantage of a credit repair service that b oasts it can erase bad credit, remove blotches from your credit repor t and restore good credit for you in a short amount of time.
Don't believe it! It takes time and effort to pay off debts and restore your credit. You can do it yourself or work with a reputable agency. Don't fall for scams that may hurt your efforts.
10. Be diligent. You can't hope to repair your credit overnight, but if you remain diligent about making payments on time and have a real desire to learn how to manage your money, it will happen.
After you've dealt with the bad credit that's been haunting you for months or years, you're ready to plan a budget that includes a savings plan "umbrella" in case bad times return and you're left without a job or means to pay your bills. Check out http://www.debtcredittips.com for more good information!
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