Your credit score can tank fast if you run up your balances and miss monthly loan payments. Some people turn to a debt consolidation loan, which can help since it rolls all of the debt into a large but single monthly payment. A low interest rate consolidation loan may stop the rot, but you need to take some other proactive steps to restore your credit.
Your Credit Report
You have the right to request a free copy of your credit report once a year from Equifax, Experian and TransUnion. Review these at least that often to see if creditors are correctly showing the status of your accounts. If anything you consolidated is still showing as active, contact the bureau or the creditors to get that updated. This is also a good time to see if any new items have mysteriously appeared on the file. If they have, you could be the victim of identity theft. Submit a fraud report to the credit bureaus immediately.
If your debts spiraled out of control once, it could happen again if you don't change your spending habits. Create a budget and eliminate discretionary expenses like magazine subscriptions. If budgets are not your thing, contact a credit counseling agency. Many non-profit groups employ experienced financial professionals than can help you create a manageable budget. Counselors can also help you negotiate rate reductions or debt settlements related to your past due debts. However, steer clear of for-profit debt counseling firms. These companies often large exorbitant fees that only add to your debt woes.
Since 35 percent of your credit history reflects your payment activity, it pays to build a positive payment history. One way to do that is with a cash secured loan. You make a cash deposit into a savings account, and the lender secures the new debt against the money. Timely payments on cash secured loans boost credit scores just as much as automobile or home loan payments.
Time serves as a great healer in the lending world. Negative items such as late payments disappear from your credit record after seven years. Even prior to that, credit bureaus mostly base the score on your recent history. A sound budget, timely payments on new debts, and the gradual disappearance of your past problems all have a cumulative impact. Restoration takes time, but the sooner you start the process, the sooner you can put your financial woes to rest.
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