Improve Your Credit Score
Never try and hide the fact that you’ve had problems with credit from potential mortgage lenders. Lenders understand that times are tough and people have valid reasons for falling behind. Loss of a job, unexpected illness and other personal matters can easily affect anyone’s financial situation. But the financial matters that negatively affect credit can be corrected and overcome by making timely payments for twelve months or longer.
Although it might not seem possible, excess debt can be controlled. Here is some good advice to help you control your debt.
Modify your lifestyle
Start tracking your expenses so you know exactly where you spend money. If your credit score is in good shape, get it in better shape by making changes in your lifestyle. Cut out excess spending on coffee drinks, manicures, entertainment, or wherever possible and use that unspent money to pay down your debt. If you’ve already cut to the bone, consider selling old jewelry, antiques, second cars, and anything you can get money for. If you have equity in your home, tap into it or ask family members for a loan. A non-secured signature loan is another possibility. If you can’t afford your home, sell it and start renting. Use the money from the sale to pay down debt.
Whatever you do, resist the urge to tap into your 401K or other retirement accounts when you need money. Always seek the advice of a financial planner first so you know the benefits and well as the consequences of such action.
Get help
Turn to a reputable credit counseling agency if you’ve already damaged your credit and none of the above options are possible. Consumer Credit Counseling Services (CCCS) has helped many people restructure their debt and may be able to help you. It can help you avoid filing for bankruptcy. Go online or check your telephone directory for contact information.
File bankruptcy as a last resort
If bankruptcy seems like your only option, opt for claiming Chapter 13 bankruptcy rather than Chapter 7. Although the Chapter 13 process is longer, your credit won’t be as negatively affected as it is when filing Chapter 7 bankruptcy. With Chapter 13, you get up to 5 years to pay off your debt, and for 7 years after you’ve paid it off, this type of bankruptcy remains on your credit report.
If repaying debt is not an option, you will probably have to file for Chapter 7 bankruptcy. Under this filing your debt is forgiven. In other words, you will not have to repay it. Although this process is typically complete in just 6 month, Chapter 7 bankruptcy stays on your credit report for 10 years after filing. With lending standards tightening, such a mark on your credit may affect your ability to obtain financing.
Get serious
If you’re serious about improving your credit, it’s time to get serious about paying your bills. Know when your payments are due and always make them on time. Don’t try to outsmart the post office or the lending institution by waiting until the last possible minute to send in your payment. Mail gets lost, lenders need time to process your payment, and it’ll be your fault if your payment is posted after the due date. When that happens, you may be subject to a higher rate of interest, a hefty late payment fee, and possibly a negative mark on your credit report.
Since interest on most credit card balances is calculated daily, the sooner the lender receives payment, the less interest you’ll pay. Also, always pay by check, never cash. A money order is an acceptable form of payment if you don’t have a checking account. Just hold onto your receipt.
Stay in contact with lenders when necessary. If you move, or will have trouble making a payment, or fail to get a bill when you should, call and speak to a representative. Inform that person of your situation and always get in writing anything that is agreed to.
Credit cards are not a necessity of life and when used improperly, can seriously affect your financial future. They’re best when used only for emergencies. But even then, it’s always better to set aside an emergency fund to cover emergencies. In today’s world, you do need a credit card so shop around and get one with the lowest interest and best terms you can find. Then, when you do need to use it, use it wisely and pay the balance as soon as possible – and on time!