Maintaining your good credit rating is hard work. It is especially difficult during the troubling economic times all of us are experiencing.   

If you have bad credit, it is challenging, but not impossible, to repair your credit.  You need a plan and lots of discipline.  In time, you can turn your credit rating around.

Let’s talk about your credit and credit card debt . . .

Good credit

Having good credit is great.  Contrary to what you read in the papers or hear, credit is available for housing and major purchases such as autos, appliances or electronics for members with good credit.  

In today’s economy, however, it is best to payoff debt as fast as your can.  Why?  Well, your credit rating is influenced, in large part, by your credit card loan balances relative to your card limits.  It is OK to have high credit limits; just keep the balances low or better yet payoff your cards monthly.

Keep your revolving accounts or credit card balances less than one-third of your credit limit.   Low balances indicate that you have plenty of room to borrow if you need. It also validates that you manage you credit appropriately.  There is nothing wrong with having two or three active credit cards.  Keeping your older “seasoned” cards open is a good idea, too. It indicates stability and credit depth.   Remember to keep your balance under control and always pay off higher interest rate cards first. 

Thinking about a debt consolidation loan?  Be careful, it takes discipline not to go back to the convenience of using your credit cards.  Get rid of unnecessary credit cards; cut up unused cards and notify the card company in writing to close out your account. A second debt consolidation loan is frowned on by creditors and you will probably be turned down. 

It is estimated that 30% of your credit score is based on how you well you manage your “plastic”. 

Bad credit

Members with bad credit are easy prey for credit card companies.  Card companies take liberties with members having credit difficulties.  When you have poor credit, the card companies can cut off your credit lines or increase your interest rate with very little, or any notice!

So what can you do when you have poor credit and plenty of credit card debt?

Your first priority is to make sure you and your spouse are on the same page. Talk to ymoney.tner or close friends about your finances. While it may seem You will need to sit down and discuss what is important to each of you; your priorities and the sacrifices you need to make to improve your credit.    If you are single, write down what you intend to do to pay on all debt, particularly your credit card debt.  You might want to talk with a close friend, too.  No one wins when you won’t talk about money challenges.  Establish a budget and timeframe to payoff your plastic cards. Prioritize your debts and payoff the highest interest rate card first.

If you are have difficulty making monthly payments or don’t have enough money to make full payments on your credit cards, there is still hope to turn your credit around.   First, stay in continuous contact with each creditor.  Tell them that you want to make regular and timely payments but that the payments will be smaller.  The credit union can help by establishing an electronic payment system for you.  Card companies like knowing that you have a plan and that the credit union is helping you.  Your action gives the impression to creditors that you are serious about resolving past due payments and that you have a plan.  Keep you account current and over time your credit rating will improve.

Dealing with bill collectors;

Typically, when a merchant has an account that is more than 60-90 days past due, it is assigned to a collection agency.  Collection agencies are in business to collect money. Agencies are paid on commission so they are less apt to want to work with you but if they believe you are trying to pay you obligation, the agency will do a workout plan with you. 

Your first step is to develop a plan and present it to the collection agency.

Request that the collector agree to remove the collection notice from your credit report after the bill is paid.  Make sure the agreement is in writing.

Avoid debt schemes or “out of debt quick” programs or so-called debt relief programs

Ask the collector if he will accept a settlement for less than you actually owe.  No money?  Perhaps a family member can help out.  It could save you big dollars.

Your best advice . .  . talk with the credit union. 

KaiPerm loan officers are experienced at helping members with credit problems.  We help members every day with the challenges of staying afloat during these turbulent economic times.