|
Five Ways to Repair Bad Credit
Author David Schneider | May 23,2007
|
Credit problems hurt more than just your credit rating. They can hurt your relationships. They can hurt your chances of getting a good job. And they can hurt your chances of getting into the home of your dreams. If you want to turn your bad credit around then you need to learn about the five basic ways to repair your bad credit.
Beg
Yes, beg. Can you really beg your way to better credit? Well, in a way. You can definitely try and sweet talk your way to better payback terms. If you find that you are not able to pay your credit card bills, your car loan payment or even your mortgage payment, then you should contact your lenders immediately and try to work out an alternative payment plan that will be more affordable for you, while still providing the creditor with a monthly payment. If you are not the slickest negotiator you can also enlist the help of a credit counselor. They may be able to get your interest rates lowered, or even reduce the amount that the lender wants to be repaid.
Borrow
Can you borrow your way to better credit? Absolutely. However, borrowing money in the wrong way is what got you into trouble in the first place, so you need to learn how to borrow money in the right way if you want to improve your credit.
First of all, you don't want to over-extend yourself. Only charge what you can safely pay off each month. For example, save the money you would normally spend on groceries each month and then charge your groceries. At the end of the month pay off your grocery bill using the money that you saved. This process will not only help establish a positive payment history, but it may also help you to earn a little bit of interest income.
Next take advantage of 0 percent interest rate credit card offers. When you get these offers transfer the balances from your credit cards that have the highest interest rates to the 0 percent credit card. This will help you to pay off your debt balance faster by applying more of your payment to the principal instead of allowing your money to be eaten up by interest charges.
If you own your own home then you also have the option of cashing out your home's equity in order to pay off your credit card debt. By doing this you will be lowering the interest rate paid on your debt, improving your credit rate by paying off your credit card debt and lowering how much you spend each month on your debt. Another great benefit of using a home equity loan, a home refinance, or a HELOC to pay off your debt is that the interest will most likely be tax deductible.
Steal?
Can you steal someone else's good credit? Nice try. No, you shouldn't be dishonest, but you can ask a family member or close friend to add you to one of their credit accounts. By doing this you will be linked to a credit account with a positive credit history. This will help to increase your credit rating.
Friends and family members with good credit can also be used as a credit role model. Ask these people how they stay in control of their debt. Learn from their example and use their debt management strategies to help you take control of your own debt.
Keep Things Simple
Living a simple but happy life is one of the best ways to repair your bad credit. To use this strategy you will need to try and reduce how much money you are spending each month, and then use your savings to pay off your debts. For example, examine how much money you spend on non-essential items like movies, dining out and junk food. Next, look at ways in which you can reduce how much you spend on essential items like transportation, food, utilities, and clothes. For example you can use public transportation instead of driving to work every day, and you can also save money by turning your heat down a couple of degrees and wearing warmer clothes. Think how much of your debt could be eliminated if you simply used the money that you normally spend on these things to pay down your debt balance.
Be Sensible
Creating a budget is another great way to take control of your debt. By following a budget every month you will know that you will have money to pay your credit card and loan payments. As you develop a positive payment history and as you pay down your debt balances your credit rating will improve. |
|
|
Print
E-mail
Del.icio.us
Digg
