Cleanup Credit Rebuilding May Really Affect Credit Score
It's not an easy thing to rebuild one's questionable credit history and credit score. Sure, there are plenty of ads on the web, television, and radio for people or organizations that will cleanup credit, provide help with scoring credit, and even settle credit payments and accounts for a fee. These ads all say things like, "we can help rebuild bad credit," or help consumers "cleanup credit." There are also numerous credit counseling programs and organizations out there who want to help consumers cleanup credit. Where does one turn for help?
The First Step is Admitting There is a Problem and Getting Help
The most important thing is to see that there is indeed a problem. Perhaps bill and credit payments have reached a level that exceed income. Perhaps it's difficult to make even the minimum payments on a credit card. Maybe several credit card account payments have been late for the past few months. All of these things will affect credit and credit scoring. Recognize that the situation is a problem and get the proper tools to fix the situation and cleanup credit.
One of the hardest things folks will have to deal with is actually admitting that spending has reached out-of-control levels and that these spending on credit problems will eventually affect credit availability and interest rates in the future. There is no shame in admitting there is a problem, or that credit has been misused or abused. That was pretty easy, right? Take a deep breath and move on to the next step. Make a list of all past expenses and bills. From that list, start cutting everywhere possible. Leave only the essential items. For instance, make coffee at home rather than spending $4.50 at Starbucks®, eat at home rather than eat out.
Stop Using Credit Cards and Start Saving Some Money
This is perhaps one of the most basic steps on the road back to financial freedom, but probably the one that is most difficult for most people. Perhaps it has become customary to use credit cards and make credit payments and that is going to be a hard habit to break. One way to get motivated is to start paying off all credit cards as much as possible, even if it's less than the minimum amount due.
When one credit card is paid off, take the money that was being paid to that fist card and apply that amount to the next card in addition to that card's minimum payment. When the second card is paid off, direct the payments previously made to the first two and add that to the third card's minimum amount due. Before too long, all the credit payments combined will start to hack away some serious debt and all credit cards will be paid off.
Begin the Actual Process to Cleanup Credit
Get a copy of the credit report and begin to study it. First, get rid of all unverifiable debts and possible black marks that were reported in error. Next, pay off existing high credit balances first. The goal is to get all remaining high credit balances down to less than 50% of the total credit line. This will increase overall available credit which is one major positive factor used in credit scoring. Use balance transfers to take balances from high interest credit cards and transfer them to a lower interest card.
If there has been a job or income loss, then by all means, stop spending money except for essentials. Try and stick to the budget made earlier and limit all spending to must-have items only like food, gas, and bills. If there is a problem with debt collectors, try checking into debt validation as a way to protect assets and personal money. This also gets the debt monkey off of your back and buys more time. Some debt validation can even excuse some debt.
Remember that rebuilding a credit history and making changes that will affect credit scoring takes a great deal of time and effort. Changes in credit score will not happen overnight so be patient. Get rid of all negative credit report information, catch up on past due credit payments, and establish new credit accounts where possible. Secured credit cards are one option as a place to begin restore a credit history and begin the cleanup credit rebuilding process.