Credit History Repair: What If It’s Beyond Repair?

Is it too late to still do credit history repair?

While everyone is unique, the pattern usually goes this way: people get credit cards before they’ve learned how to manage them. They overspend on them. They get more cards. They max them out and borrow from one to pay another. Finally, they can even make all the minimum payments and they start falling behind.

Maybe you’ve been through that already. The good news is you still have options. The main credit history repair options are bankruptcy, debt settlement, debt consolidation, credit counseling or learning to manage your debt better.

People often worry how making any changes will affect their credit. The more important issue is the mountain of debt that’s eating your financial future. With too much debt, you won’t be able to get any more credit anyway. Plus it’s disrupting your cash flow.

Bankruptcy is good for people who have few assets and way more debt than they can pay back. It does cost a little bit of money and it will stay on your credit for up to 10 years.

Debt settlement is a good option for most people. Yes, it will hurt your credit in the short run because you have to go delinquent before creditors will work with you. You save up the money you’d be paying in minimum payments and then offer your creditors around 40% in a lump settlement. Make sure all your legal bases are covered such as getting it in writing and avoid having your wages garnished.

Debt consolidation is where you pay off all your loans with one big loan. Usually the only place to get a loan that big when you have too much debt is from your home equity. The danger is that people often spend on their paid off accounts again and end up with twice as much debt. Then their home is in jeopardy because now they have twice the payments to keep up with.

Please don’t even attempt credit counseling. If you follow the money, they’re working for the creditors. They get a cut if they set you up with a lower rate from a creditor. That’s why most of them don’t work with all creditors. You can lower your own interest rate if that’s all you need. And for that service, they’ll put a third party intervention mark on your credit which is not a good thing.

A final option is to manage your spending better. Pay down your highest interest accounts first and negotiate for better rates. If you need to transfer balances to lower rate credit cards, do it. Make one account give you better terms than the other. Once you pay off one, use that payment to accelerate payments on the next until you’re happy with your level of debt.

While your current situation may look dismal, there are always options. Figure out what you really want to accomplish and get started.

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