How to Improve Your Credit Problems

How To Improve Your Credit

Do you have credit problems? Then you need to go through the process of credit repair or be prepared to discuss them honestly with a mortgage professional. A good and responsible mortgage professional knows there can be justifiable reasons for such problems.

For instance, you may have experienced things such as unemployment, illness or other financial difficulties. If your payments have been on time for a year or more and your credit problems have been corrected, your credit may be considered satisfactory.

Perhaps you currently have excess debt, there are four ways to regulate it:

1. Maybe your credit is not so bad. You can reduce your other expenses. This may mean making hard choices or changing your lifestyle to fit your income. It might be good to sell a second car or take equity out of your home. Consider applying for a non-secured signature loan. Perhaps obtaining a loan from a relative. You could sell your home and paying off your debts with the proceeds and then renting for a time. Think about cashing out your 401K/retirement benefits or selling family heirlooms, jewelry, etc.

2. Possibly your credit is already damaged and the above options are not attainable, go through a consumer credit counseling service (“CCCS”). Check your yellow pages for the local number. CCCS may be able to help you pay off your debts as if you were in a Chapter 13 bankruptcy, but you don't actually file for bankruptcy. They are usually a non-profit business that helps people with credit problems.

3. If CCCS won't take you, you may want to consider bankruptcy. Claiming Chapter 13 bankruptcy takes longer than a Chapter 7, but your credit will end up in a little better standing. Chapter 13 bankruptcy gives you up to 5 years to pay off your debts. The disadvantage is that you're in bankruptcy for up to 5 years plus your credit report shows your bankruptcy for 7 more years after you have finished paying off your debts.

4. If you are so far in debt that you can never repay it, then the best solution may be a Chapter 7 bankruptcy. A Chapter 7 bankruptcy is the least desirable from a credit standpoint, but you are typically out of bankruptcy in 6 months and you don't have to repay any debt. The disadvantage is that this shows on your credit report for 10 years from the date of filing your bankruptcy. Creditors are starting to tighten their credit requirements, and you may have a tough time getting future financing.

Now your debts are under control, but you want to improve your bad credit history, the most important factor is to make your monthly payments on time. This can help you avoid credit problems in the future.

Use pre-addressed envelopes enclosed with your statements to mail your payments and call the company if you don't receive your usual statement.

If you carry a balance, send your payment as early as possible. Most businesses calculate interest on a daily basis. So the sooner they receive your payment, the less interest you'll pay. On time payments keep you out of credit problems.

It's the day your payment is received that counts, not the postmark date. So don’t PROCRASTINATE. Give the post office sufficient time to deliver your mail. Five business days is a good guideline unless it’s a credit card. Then you should give ten to fourteen business days to avoid late fees.

Remember late payments many times mean late fees, higher interest, and/or a negative mark on your credit report. Which will then require credit repair. Save yourself the time and pay on time.

Never send cash. Open a checking account if you don't have one, or spring for a money order and keep your receipt. Finally don't forget to tell your creditors your new address when you move.

If you are worried about making payments, make a list of your debts and when the payments are due. A large calendar can help with this. Take the debts that are due on for the month and transfer over to the next month. Be sure to check your calendar regularly. By doing this on a regular basis, credit problems will become a thing of the past.

Contact your lenders immediately if you think you will have trouble meeting the monthly payments to arrange a payment schedule.

Using the money from your retirement account or tapping the cash value of your life insurance policy to pay bills or living expenses may have serious implications. Try to get advice from an expert before you take any major financial undertaking.

Credit cards can be priceless in a crisis. They allow you to charge items and pay them off over time. But they can also be hazardous to your credit if you aren't careful and charge more than you can afford.

Choose those credit cards with the lowest interest rates if you have to use them. Try to pay them back as soon as you can to cut your costs.

If you would like to learn more about credit repair and how to avoid credit problems, click here.