Business Finance Profile

Posts Tagged ‘bad credit’

Those little pieces of plastic can sometimes get you into trouble. Sometimes nothing is easier than to take out your credit card and pay for that sweater or piece of furniture you have been eyeing for months. And who hasn’t been asked by the check-out person to sign up for a credit card in order to save 15 percent on their purchase. Credit card offers are everywhere; they come in the mail on almost a weekly basis.

Many Americans have gotten themselves in credit trouble by the easy access to credit cards. But bad credit is not something to take lightly. Bad credit can make it hard to get a loan for a car or a house. When you find yourself in credit trouble one of the first things to do is to eliminate as many credit cards as you can. Get rid of them, they are just too tempting. With a deliberate plan and some time you can restore your good credit. Just take one step at a time. If you just can’t seem to pay the bills try contacting your creditors and see if they will work out an agreement with you on your payments. Tell them you are having trouble and want to make a good faith effort in paying them. Do not let them have the chance to turn it over to a debt collector.

Contact a local credit counseling office. Many of them are non-profit and have the professional experience of helping people with their finances. See if consolidating your debt at a lower interest rate may help you. It might be a good idea to take out a second mortgage on your home or a home equity line of credit. But before you work with any group that says it can help you be sure and research them. The last thing you need is to get involved with an organization that is going to take advantage of your situation.

One thing that will help you feel better about yourself is try to pay the smaller debts off first. That way you know you are making some head way in your road back to good credit.

Try to find a new mind set about credit cards. Think of them as cash; ask yourself if you will be able to pay off your purchase in several months. Think for a moment; is this something I really need now or just something I want.

The most important thing to remember is not to give up. Do not feel bad about yourself, there is a way to get back on track and get your credit in good standing again.

Buying a home is an investment in your future. Even with bad credit you can start the process of rebuilding your credit and building your net worth through your home’s equity. By monitoring your credit, researching lenders, and selecting the right loan, you can purchase a home at reasonable rates.

Fix Your Credit First

Before you start shopping for a mortgage, make sure that your credit report is accurate. Follow up with the credit monitoring service to make sure all errors are fixed. You can get a free copy of your report from several companies.

While credit events remain on your report for up to ten years, they cease to be important after two years. So with a bankruptcy three years ago, it is possible to qualify for an “A” rated mortgage.

But there are other factors that determine your loan rates, such as your cash reserves and the size of your down payment. You can qualify for a conventional loan rates even with a poor credit score.

Avoid The Wrong Kind Of Lenders

There are companies that would take advantage of your credit situation. They would have you believe that with bad credit, you will have to pay huge closing costs or rates double or triple of conventional loans to buy a home. Run from these lenders.

Subprime lenders offer bad credit loans at one to two points higher for each drop in credit rating. And loan fees are comparable to conventional loans. In order to find these companies, you need to request loan quotes.

With online lenders, you can receive these loan estimates within minutes. Based on your personal information, you can get a realistic picture of your loan costs and mortgage payment. And when financing through a subprime lender, you don’t have to pay for private mortgage insurance if your down payment is less than 20%.

Keep An Eye On The Future

When negotiating your mortgage, make sure you have the option to refinance in the future. Ask for no early payment fees, so you won’t have to pay thousands if you choose to move or refinance.

Before you begin the process of repairing your credit, you first need to ask yourself why you are having credit problems? Poor credit is nothing to be ashamed of. It is far more common than you may realize. Often it may not even be your fault, like Gerald and Lisa.

They invested five years and all they money they saved to start a small sign company. Then one summer someone broke into their business office and stole all the computers and expensive sign-making equipment. Unfortunately they did not have any insurance to cover what was stolen, so they had to take out loans to replace the items so they could stay in business. It took them years to recover financially from that, leaving them with bad credit.

On the other hand, like Paul, some people make poor credit decisions. After Paul got his first card, shortly after graduating from college, he suddenly became flooded with offers for more credit, which he promptly took up. He wanted to show everyone that he was a success at his new career as a sales manager, so he filled up all his credit cards.

Then he began the juggling game of “robbing Peter to pay Paul,” which only got him deeper in debt. He took out a consolidation loan to pay off all the cards and put the debts in one big payment, but the temptation of all the empty cards was too much for him and he filled them all back up again. He finally had to declare bankruptcy because he was so deeply in debt that it was beyond his ability to ever pay off.

So, take a good look at what is going on in your life. Why do you have credit problems? Are you in debt because of circumstances beyond your control or is it a chronic situation? Are you still getting deeper into debt or are you fixing the problem? There is no point in fixing your credit if you will just end up losing it.

If you find that you are getting too deep in debt, there are several things you can do right away to help the situation, before it gets out of your control.

* Contact the credit card companies and see if they will work with you to help lower the monthly payments.

* Talk to a nonprofit credit counseling company, like Consumer Credit Counseling Service at http://www.cccsintl.org. They provide budget counseling, educational programs, debt management assistance and housing counseling. They have branches in many location of the United States.

Beware of some “for profit” organizations that will help you with debt consolidation loans. Often they are very costly. Why go to them when you can get free reliable help from a respected non-profit organization like Consumer Credit Counseling Service?

There is no quick fix for credit problems, but with a little patience and determination, you can not only get it under control, but you can end up with great credit and the feelings of success and self-worth that go along with it. So take the first step and determine to get debt free today!