Claw Your Way Out of Bad Credit Hell

Are you experiencing a bout of financial problems? It can seem overwhelming at times, knowing that bill collectors are blowing up your phone and threatening to come after you left and right. And credit problems only get worse if you decide to ignore them. A low score can make it difficult to finance a house or a car, but these techniques can help you claw your way out of bad credit hell.

Work on Paying It Off

Escaping the dungeon of debt starts with paying it off. It certainly isn’t easy; otherwise, you’d have a spotless credit report. But it isn’t going to disappear on its own. Consider trying the snowball or avalanche method, developed by financial guru, Dave Ramsey. Which one is right for you?

With the avalanche method, you tackle your largest debt balance first. You can also choose the credit card or account with the highest interest rate. Tackling the big amounts first can make it easier to work your way down the line and pay the rest of your debts off.

If you need a little motivation to go after your debt load, the snowball approach may be a better choice. Start paying the smallest debt amount off first. From there, work up to the highest. Seeing some real movement in your debt pay-off approach can push you to keep going forward.

Give one of these a try. You may be surprised at how quickly your FICO score goes up.

Know Your Credit Utilization Ratio

Your credit utilization ratio plays a dominant role in what your credit score is. In a nutshell, it’s how much revolving credit you’re using versus what’s available (your credit limit). Divide your overall credit limit by how much debt you owe to determine your ratio.

Getting the percentage under 30% is ideal, but the lower the better. The more you max out your cards and lines of credit, the higher the percentage and the more it affects your score. Try to pay off your balances, but don’t close your accounts. You want to keep your available credit as high as possible to keep your ratio down.

Don’t Ignore Your Creditors

If you know you’re going to make late payments or even default, the last thing you probably feel like doing is chatting with the bank or a bill collector. They can be persistent and bothersome, but now is the time to reach out. Call and ask if you can get on a repayment plan. This can help you get back on track to chiseling away at the balance. Reworking the payments and waiving late fees can help prevent your debt from spiraling out of control.

Get Some Professional Help

Failing to pay your debt can result in creditors taking extreme steps to collect. The first step is a default judgment. From there, they can garnish wages, take tax refunds and go after property assets. You don’t want it to get that far. This is when you’ll want to consult with a credit counselor to guide you.

They’ll most likely go over these options:

Debt consolidation allows you to work with your creditors to consolidate accounts and reach a more affordable monthly payment.
Debt settlement can help you pay pennies on the dollar through the original lender.
Transfer the balance from a high-interest card to one with better terms.
Bankruptcy could eliminate your debt or help you repay it over time.

Credit counselors have the experience and knowledge to help you get back on track, so see a pro if you’re unsure about which route is best for you.

It takes minutes to spend a few hundred bucks on a high-interest card, but it can take years to pay it back. Maybe you’ve made some poor financial choices in the past, but that shouldn’t scar you for years to come. Initiate these tips, make positive changes and get started on turning your credit around today.

~Here’s to Your Success!