If you have a mountain of debt, your credit score likely isn’t in the best shape. There are several things that you can do to try to improve your credit score, but it does take time. If you have more debt than you can reasonably pay, there are some other options for you as well.
Watch Credit Card Balances
It is vital that you do not use more than 30% of your available credit for a higher score. If your credit cards are almost maxed out, you should avoid using them and start paying them down. The same is true for lines of credit and other personal loans. The lower your balances, the higher your credit score.
Pay On Time
Paying your bills on time is a large portion of your credit score. If you have fallen behind on payments for loans or credit cards, try to get them back into good standing as quickly as possible. It may be possible to get credit cards in good standing by making the minimum monthly payment. However, keep in mind that this usually only covers the interest and a tiny amount of the principle, and therefore you will not be able to lower your credit card debt by just making the minimum payment.
With loans that have fallen behind or other bills, contact the creditor and see what they might be able to do for you. Some creditors may work with you to place your accounts in good standing with the credit bureaus in exchange for a set amount toward the balance due or with the setting up of an acceptable payment arrangement.
Leave Old Debt Alone
If you have old debt that has been paid off, make sure that stays on your credit report as long as possible. Many people believe that old debt looks terrible on a credit report, but if the account shows paid as agreed, then this only helps your credit score. Credit entries remain on your report for seven years unless you request to have them removed. Leave the old debt where it is, and your score will not suffer.
If you do not have the means to pay your debt, you may benefit from filing bankruptcy. Filing bankruptcy in some cases can actually raise your credit score. By filing bankruptcy, you are able to decrease your debt to income ratio, because the debt is dismissed. This improves your rating. Depending on how much debt you have, filing bankruptcy, although it hurts your credit, could raise your credit score.
If you are concerned about being able to make it after filing bankruptcy, there is no need for worry. When you file bankruptcy, you are able to claim federal bankruptcy exemptions that allow you to keep your home, your car, jewelry, and other assets. This will enable you to maintain a reasonable quality of life while you are getting back on your feet financially.
As soon as possible after filing bankruptcy, you should start trying to rebuild your credit. You can do this with credit cards and personal loans designed for people with bad credit. Auto loans are also an excellent way to get credit when you don’t have a high score. As your credit builds, your score will increase quickly.
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