The 7th step to repair bad credit (don’t do it again)
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The title of this article may seem simple, read stupid. However, it is easier to say it than doing it. A year after you put everything in place, you will have access to more and more credit cards and line of credit offers. You will start receiving instant loan offer and good credit card transfer rate. The worst part would probably the furniture installment program where you don’t have to pay a penny for 6 to 12 months. Those types of loans are the worst since they are insidious and you don’t see the 18% interest rate coming after the 12 months “grace” period.
If you rebuild you credit bureau and keep going with good saving habits. Most institutions will give you a second chance. However, since the statistics are against you (more than 50% who had late payments are likely to be delinquent in the future), you might hit a wall from time to time. The key is to stay focus on your goal and to clean up your bad debts.
So once you have paid them all, don’t go crazy on asking for more money. Keep the habit of paying yourself first and pay cash for your expenses. |
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You want a new kitchen table? Plan it in your budget and put money aside until you can pay it off completely without using your credit card.
If you were able to get to this point, this means that you were able to identify what went wrong in the first place. Keep it on a post it that you will tag on your budget sheet. This will help you remind how you got into financial trouble and how hard it was to get out of debts.
You may have to change friend
As it is the case of any of our habits, we are influenced by friends and family. If people around you have spending problems or they are maxed out and looking for money all the time, this may be the time to say goodbye and take a new start. This will surely be hard, but if you change your lifestyle, you will ultimately create a trench between you and them. How come an individual that is always buying more and more stuff on his credit card could understand one that is saving systematically and thinking twice before going out? Flirting with bad influences is the best way to get back into the abyss of debt.
So you have 2 options: either you split up or you convince them to go your way. By sharing your savings goals, you may be able to help each other and achieve them faster. This will be also helpful to have somebody to talk too when you are depress or discouraged in front of all your debts. Repairing your credit is not an easy task!
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180th Carnival of Personal Finance on November 24th, 2008
[...] from the Credit Toolbox suggests “The 7th step to repair bad credit? (don’t do it again).” He says in order to repair bad credit, you must change your spending habits. I agree, but [...]