Tip #29: Start repairing your credit right away
after a big financial upset.
A big financial problem is an
emotional as well as a monetary burden. Plenty of
debtors feel so terrible about their financial problems and
so uncertain about their money that they go into deep
denial, refusing to think or work on their financial
problems. This is likely to only make the problem
worse.
Everybody suffers from financial
difficulties once in a while and every professional in the
field of finance - from loan managers to bankers - knows
this. Plus, financial professionals - including
lenders - want your business and so are willing to work with
you to help you solve your problems.
If you have had a financial
problem, or are even headed towards one, start working on
repairing the situation right away. If your credit is
suffering because you have not paid some bills, for example,
don’t make it worse by waiting until you are reported to a
collection agency (by which time your credit rating will
have taken an even worse hit). Instead, work on paying off
your bills or arranging a payment schedule right
away.
Tips #30:
Consider co-signing for loans - but consider well before
taking the leap.
If you have very poor credit
scores following a bankruptcy or other disaster but need to
get a loan, consider getting a co-signer. If your
co-signer has assets or a better credit record, you may
qualify for a better loan rate.
However, be wary - if your
co-signer refuses to make payments, then both of you will
suffer the credit fallout. Co-signers share
responsibility for loans and credit - both of you will have
worse credit scores if one of you does not pay.
On the other hand, if your
cosigner has good credit and makes payments, then the
co-signed loan can actually boost your credit score.
Tip #31: Don’t overlook bankruptcy.
A bankruptcy will affect your
credit score more than just about anything. Worse, it
will affect it for many years. In the first few years
after a bankruptcy, you may not be able to get loans at
all.
In short, a bankruptcy is a
legal proceeding that either forgives you of your debts or
allows you to pay off just a small fraction of your
debt. It will nearly ruin your credit rating at first,
but it will also allow you to dig out from overwhelming debt
and reestablish a good credit rating again after
years. A bankruptcy will no longer show up on your
credit report after ten years.
If you are very seriously in
debt and have no way of repaying your bills, a bankruptcy
can help you by stopping collection call agencies and other
problems. Also, if you have been very negligent in
paying your large debts, your credit rating has already
likely suffered greatly.
While a bankruptcy will depress
it even further, at least it will give you the chance to
repair your credit by giving you a “clean slate” free from
large debts.
Tip #32: Don’t choose bankruptcy as an easy
out.
Bankruptcy is a serious credit
problem - it is not just a “ding” on your credit report - it
is a huge red flag to lenders. After a bankruptcy, you
will be ineligible for credit cards, many types of credit
and will even be told what you can and cannot buy. The
procedure of bankruptcy can also be draining.
Bankruptcy should only be chosen as a last option if you
really require your debts to be forgiven because you have no
way of repaying them.
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