By Joe Pujol
You know that you're supposed to pay your bills on time, and to pay off your debt in full each month—or at the very least keep a low balance on your card. But, life is unexpected, and emergencies happen: medical bills, job loss, household repair, and more. What can you do when you're struggling and don't have the funds to allocate to debt?
These are the hard-and-fast steps you need to take today in order to stem the damage and begin the climb upwards towards a healthy, secure credit future. Taking action now will not only alleviate the anxiety surrounding your financial situation, it will increase your confidence that you can transform your situation for good.
Order your free credit report if you don't have one. Make a comprehensive list of all your debt, and locate the phone number of each company. Place this list somewhere prominent: you need to know what you're up against. Notate any errors or fraudulent activity on your report—you can dispute these later by composing professional letters to the companies.
Contact and set up a payment plan with each company and agency. If you're truly having financial difficulties, Pujol Law can help you negotiate with credit card companies for a forbearance, and halt your payments for several months. Collections will generally accept any amount you are able to pay monthly. Choose a sum small enough that you could afford to pay that price for each separate collection or debt. If you can make a payment arrangement and get it in writing, it will prevent further hits to your credit score, and communication with your creditors is always a positive in your favor.
Credit utilization is the ratio of your debt to credit limit. It's best to keep the ratio at 30% or less, but anything under 100% is a step in the right direction (100% can lead to a penalty increase in your APR). If you've had the card for a while, ask the company to raise your credit limit. This will immediately improve your credit utilization score by increasing your amount of credit relative to your debt. Another way to increase your overall credit is to apply for a new line, but this should only be done if your score is in relatively good standing and you don't have many cards.
According to FICO (creator of the credit score), "…you need to repair your credit history before you see credit score improvement." Start with the simple things, stay in communication with your creditors, and set up an easy payment plan. Once you get your feet back underneath you, you can begin to take bigger steps.
Pujol Law Group serves the needs of Florida homeowners whose credit is suffering from foreclosure, short sale, or loan modification. Repairing your credit can be a difficult process, but we help guide you through it. Call us today to schedule a free consultation.