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Fixing Bad Credit and Moving Forward | Financial Planning Tips

Fixing Bad Credit and Moving Forward

Having unsettled credit could lead not only to bad financial condition which could cripple one’s privileges with the creditor but also to other lending institutions. The longer bad debt stays, the more negative effects it will bear to the debtor which is why it is essential to fix it right away. It is not as hard as everyone might think if the proper measures are followed.

First Things First

First of all, you can fix or improve your credit even without a substantial amount of money, but you definitely require a steady financial source that exceeds your existing expenses. A job does not necessarily need to pay high, but it needs to be able to cover all of your expenses and provide an extra partition for debt settlement. You might need to work two jobs to make this happen.

This can be very difficult if you have children, are married and both you and your spouse are working and/or going to school. Both children and education are expenses of time and money, so trying to clear debt and fix your credit while raising a family and trying to establish a successful career path will be challenging.

You will need to take a real good look at the configuration of your life and you might have to make some sacrifices temporarily. Make sure you understand clearly how your credit got bad and whether or not you are going deeper in debt given your current income to expense ratio. You cannot fix things unless you understand why they are broken,

An income stream that is greater than your expenses will not only provide money for repaying debt, but will also show the crediting agency that you are doing your part and are willing to take responsibility.

Obtain your Credit Report

Once you have taken care of the basic “housekeeping”, you then need to obtain a copy of your credit report which can be requested from the credit bureau. Check for any errors and immediately correct them.

What you want to look out for are the indications of “on time” or “late payments” and listing of debt that has been settled. This is so you will be able to get a good and exact view of how much you truly owe. After everything has been set straight, list down the amounts of outstanding debts one by one with necessary information such as interest and due dates.

Prioritize accordingly with the highest interest rates and pay little by little to eliminate your problems one by one. However, if you think that the outstanding debt which you have computed is too much for you too handle on time, find a credit counseling agency to help you.

Working with them allows you some advantage as it shows again that you are committed to repay your remaining balance. Consolidation of debt may also be easier as professionals will handle the negotiations and agreements with your creditors. There are also crediting agencies which are willing to lower debt with clients who have used consolidating agencies.

Don’t take the U.S. Government’s example and continue to borrow to service existing loans. It is very apparent that this will further you down the road of debt. This is why the United States has a staggering debt of over 16 trillion dollars and also why the U.S. credit rating has recently been downgraded for the first time in history.

Instead, stay away from credit by cutting your cards and asking for account closure. If possible or willing, liquidate some assets such as luxury cars or jewelries and unecessary service you might be using, like your weekly house cleaning lady. You might have to trim the fat and run lean for awhile in order to get caught up, but you can do it. If you have a clear goal in mind and work steadily and intelligently toward that goal, you surely will accomplish it. Once you reach the worthy goal of rebuilding your credit, you will be in a happier place with more options and opportunities.

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