Sometimes when you owe money or find yourself in a difficult financial situation repairing your credit can seem like a long and arduous process.
There are a number of things that you can do to repair your credit – one of course being to pay your debts. This however is easier said than done.
However, by following a well thought out plan you can successfully overcome this obstacle.
Let’s get started…
Order Your Free Credit Reports
Your first step should be knowing where you stand in terms of credit score. Start by getting a copy of your credit report.
By law, the Fair Credit Reporting Act entitles everyone to one free copy of our credit reports from each of the three credit reporting agencies (TransUnion, Experian and Equifax) once a year. To order your free credit reports simply visit the federally mandated website at www.annualcreditreport.com.
It’s important to note that the three main credit reporting agencies are separate competing companies and do not share their data. For this reason, you’ll want to check all three of your credit reports for errors. If you do find errors, you’ll need to file a dispute directly with the credit reporting agency where the error is being reported. via: How to Be Your Own Credit Repair Specialist
Review Your Credit Report for Errors
Once you’ve received copies of your credit reports, you should thoroughly review the documents for errors. If you happen to find an error, contact the respective agency in writing and tell them what the mistake is.
It’s a good idea to include copies of supporting documents to illustrate the error. Clearly state each item on the report that you are disputing, and carefully word your request so there’s no room for misinterpretation. It’s a good idea to include a copy of the credit report with the disputed items circled. Keep the original documents for yourself and make copies of your letter and anything else you send them.
Include your mailing address so they can reply, and send your request by certified mail so you can track it and confirm it has been received. Better yet, avoid the possibility of your request getting lost in the mail and file your dispute online. If the information was reported incorrectly to more than one bureau, file the same dispute with each bureau. via: Are You the Victim of a Credit Report Error? Why Credit Repair May Involve Challenging These Errors
The Ultimate Credit Repair Challenge
Now that you have thoroughly gone through your credit report and fixed any errors it’s time to make some changes.
You need to have a sound strategy. A plan that is foolproof.
Plus, it’s time to start paying off those debts.
Take Care of You
First, let’s get real with you and your money. Why are you in debt?
For some people, their debt exists due to large medical bills, job loss, or other unforeseen circumstances, while for others it may be the result of poor spending habits or even a shopping addiction.
Knowing how you got into debt or financial trouble in the first place will help you determine the right strategy going forward.
In most instances seeking outside support is recommended. Credit counseling can provide education, while organizations like Debtors Anonymous can help with the emotional challenges. Find an organization that is right for you. Make it a priority.
Talk to Your Creditors
The next step is to try to negotiate with your creditors. Quite often credit card companies and even lending institutions are open to a repayment plan. They would much rather you continue paying them then sending your debt to collections.
So get on the phone, send emails, make contact. Explain your situation and see what they can do. Even if they are not responsive at least you have tried. This is important because if your situation gets worse and you need to file bankruptcy down the road you have a paper trail showing your attempts to fix the problem.
If however, you are able to successfully arrange a debt repayment plan then make sure that you never miss a payment. Next time they won’t be so lenient and you may just find your debt in collections.
Consider Debt Consolidation
If your monthly payments are so widely dispersed that you are barely making a dent in any of your debts then you might need to consider consolidation.
Tons of people every single day are repairing their credit and paying down debt through consolidation programs.
Just think about it…it’s much easier to make one lump sum payment per month rather than 5 or 6 small ones.
If you are paying several different loans off, your life may be easier if you consolidate everything into one loan. You’ll only get one monthly statement and make one payment. If you use a debt consolidation program that stretches your payments out over a longer period of time, you’ll find that your monthly debt payments decrease. You’ll pay out less each month and you will be able to free up some cash. via: Debt Consolidation Programs
Ideally, you should look for a program that won’t charge you high interest rates or costly monthly fees. Debt consolidation programs affiliated with religious organizations tend to be less expensive compared to others. Make sure you do your homework.
A Word of Caution…
Although debt consolidation is not bankruptcy, depending on how it is approached it can be perceived in a similar way. When you are consolidating debt, you’re paying 100 percent of your obligations, which is quite different from discharging them in a bankruptcy or settling the debt. But still, your credit report can suffer if your monthly payments are less than what you would normally pay.
Also, while consolidation is not factored into a credit score, some creditors notice that you’re paying through a third party, which can be a red flag to a lender or anyone else looking at the report. via: 9 things you must know about debt consolidation
So don’t fall in the trap of making the smallest monthly payments unless you have to. Make the effort to pay as much as you can afford every month and put your debt behind you in the shortest amount of time possible. And choose debt consolidation only if you absolutely have to.
To overcome this obstacle you need to face the problem head on. Unfortunately it doesn’t matter to creditors how you got into the situation in the first place. The key is to take control of it now. Jump through the hurdles whatever they may be and fix the situation as quickly as possible.
Don’t forget to talk to your creditors, explain your situation, and pay off the agreed amount. When you put in the effort to repay the debt, show over a period of time that you have honored the agreement, you may be able to turn around your situation with that creditor.
And if debt consolidation is the right choice then make sure you make your payments and try to pay it off as quickly as you can as well.