Help! My Credit Sucks!

The Challenge

Credit has become more important than ever for creating and maintaining financial stability.


The use of credit touches practically every aspect of our life. Not only is it used to purchase large ticket items such as homes, cars and education and small businesses, but it can determine whether you receive low rates on your insurance premiums, utility services like phones and electricity as well as some employers determine if you are hired for your next job based on your credit score.


With so much at stake, wouldn’t it make sense to stay in control of your credit report?


You bet it does. Yet many consumers and small business owners are kept confused and in the dark about the rules and laws surrounding this critical financial tool.


There was a time before the recent economic down turn and credit crunch that money flowed easily and a credit score of 620 was considered very good. However that is not the case today. Banks and lending institutions have made it very difficult to get a mortgage, start or expand a business or even get credit cards without a score of 720 or more.


The paradox is the more difficult the banks make it for individuals and business owners to borrow money, the longer it takes the economy to recover. As long as recovery stalls, the tighter the credit crunch becomes.

And with individuals losing their jobs and small and big businesses closing, the increase in credit derogatorys skyrocket as borrowers fall behind in payments.


So how do you get off the vicious cycle of credit craziness?!!


Good question. And I am here to provide you with some great answers.


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I’m Facing Financial Leprosy, Help!

The economy is not in the greatest of shapes at the moment, you’d have trouble borrowing a pen from a bank let alone money and if you entered this crisis with a credit history report that looked like a marker pen wielding, epileptic, tic-tac-toe fanatic had gone to town on it, then you haven’t got a chance.

Lenders don’t want to know you unless you have a credit history that resembles Christ’s resume; but all is not lost. This is the time when you should look to preserve what credit score you have and possibly improve it by some positive action.

We’ve already mentioned that lenders will treat owners of bad credit histories like social lepers, well that’s not completely true. If you are a home owning leper you may have a chance!

With the government urging banks and financial institutions to start lending again the likelihood is that the first borrowers who will benefit, are those able to offer collateral so if you fall into this bracket you may be able to apply for a secured consolidation loan, it won’t be easy though, and hopefully, by the time you will be able to do this, you may even have some value left in your!

If you don’t have any collateral I’m afraid it is about making the best of a bad situation and the best way to do this is to manage your debt effectively. You need to work out your income and your vital expenditure (mortgage or rent, utility bills, telephone, car costs, taxes, gas, basically everything you need to live, get to work etc.). Now, what you have left over is what you have available to pay off your unsecured debt each month.

Your biggest concern should be if you are struggling to make monthly payments yet you have more than enough to cover your monthly repayments – this generally means that you are partying way too hard and you probably have a drug problem too, get some help. If, however, and I suspect this maybe the case, you don’t have enough left over to cover your debts, then you need to start the process of negotiating with your creditors to lower your monthly payments before things start to get ugly and you’re debt keeps growing.

There are two ways to go about this; the first is to approach one of hundreds of debt management service companies currently available, many of them are excellent but just as many deserve to be put up against a wall and shot. I don’t, and never will, condone this sort of behavior towards financial institutions, it doesn’t work for a start; best to hit them in the pocket.

Seriously though, check out whoever you are considering speaking too with the Better Business Bureau first.

Debt management companies are excellent at negotiating with your creditors and will manage your debt by asking you to make a singular payment to them each month which they will distribute between your creditors, after taking a small management fee of course, even the non-profit companies have to eat!

The other alternative, and it is the one I would advise to use is as above but you act as your own debt manager; it is not as hard as you may think and the biggest benefit is you remain in total control the whole time.

If you want to know about the methods that the banks and other financial institutions hate people using to eliminate their debt quickly check out the sites at the end of this article. I have knick-named these methods ‘MEL’, which stands for Moral, Ethical and Legal, no wonder the banks hate them!

By: Daniel Major