What do I do if my credit is bad?
If you have had credit problems, discuss that with us honestly.
We know there can be legitimate reasons for credit problems, such
as unemployment, illness or other financial difficulties. If you
had a problem that's been corrected and your payments have been
on time for a year or more, your credit may be considered satisfactory.
If you are currently in excess debt, there are four ways to control
it:
1. If your credit is not in terrible shape, you can reduce
your other expenses, even if it means making hard choices or
changing your lifestyle to fit your income. Consider selling
a second car, taking equity out of your home, applying for a
non secured signature loan, obtaining a loan from a relative,
selling your home and paying off your debts with the proceeds
and then renting, cashing out your 401K/retirement benefits
or selling family heirlooms, jewelry, etc.
2. If your credit is already damaged or one of the above isn't
an option, contact us to help you go through Consumer Credit
Counseling Services (CCCS). 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.
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. If your
debts are under control now, but want to improve your bad
credit history, the most important factor is to make your monthly
payments on time.
Use pre-addressed envelopes enclosed with your statements to
mail your payments and call the company if you don't receive your
usual statement. Also send your payment as early as possible if
you carry a balance. Most companies calculate interest on a daily
basis, so the sooner they receive your payment, the less interest
you'll pay.
Don't procrastinate. It's the day your payment is received that
counts, not the postmark date. Give the post office sufficient
time (five business days is a good guideline) to deliver your
mail. Late payments may mean late fees, higher interest, and/or
a negative mark on your credit report. Never send cash. Open a
checking account if you don't have one, or spring for a money
order and keep your receipt. Finally do not 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. Contact us or your bank immediately
if you think you will have trouble meeting the monthly payments
to arrange a payment schedule. Taking 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
you haven't considered, so try to get advice from Community CPA
& Associates at 1557 2nd Ave, Des Moines Iowa before you take
any major financial actions. Their number is 1-888-964-8771 or
515-288-3188.
Credit cards can be invaluable in a crisis, since they allow
you to charge items and pay them off over time. But they can also
be dangerous if you aren't careful and charge more than you can
afford. If you do use credit cards, choose those with the lowest
interest rates and pay them back as soon as you can to cut your
costs.
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