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Bouncing Back from a Credit Crisis

It happens from time to time: you experience bankruptcy, or a foreclosure on your home, a divorce, or even just excessive late payments on credit accounts. These can all negatively impact your credit for up to seven years after they happen. Working your way through these unfortunate circumstances can be tough, but there’s a light at the end of the tunnel. With a solid plan, you can bounce back from a credit crisis. Start by clearing your debt, and consider these tips during and after the crisis to keep from entering into the situation again.

Create a budget.

Knowledge is power and the more you know about your monthly expenses, the better prepared you’ll be. Start by calculating your household expenses. Factor in bills such as electricity, heating, and groceries. Once you’ve established how much you absolutely need on a month-to-month basis, turn your attention to your personal expenses. Where does your money go each month? How much are you spending on unnecessary expenditures such as cigarettes or coffee? Account for every expenditure you make and you’ll soon have complete control over your finances.

Apply for a Secured Credit Card

Secured credit cards differ from regular credit cards. With secured cards, you’re making a refundable deposit anywhere from $300 to $1000, and the bank gives you a credit limit for that amount (so if you deposit $700, you have a $700 credit limit). This method allows you to improve your credit score in a safer way than using a high-interest credit card. When you’re using a secured credit, pay attention to how they’re reporting to credit bureaus (TransUnion, Experian, and Equifax), because you’ll want to make sure they’re reporting properly. Otherwise, you’ll have a tough time rebuilding your credit.

Pay with Cash

One habit that is easy to get into, but hard to break, is using credit to supplement your income. The problem here is that the method your credit is guaranteed to get out of hand, because you’re only buying things you can’t afford – and if you can’t afford it now, you won’t be able to afford the payments later. The solution? Stick with cash. If there’s not enough money in your bank account to afford it without going over your budget, then you can’t afford it. Save your credit cards for actual emergencies.

Capitalize on an Installment Loan

While it may seem counterintuitive to open a loan while you’re trying to move away from credit, a small loan can actually help you. By opening a small and easily-manageable loan, you can build your credit by making affordable payments without having to worry about getting into trouble.

Maintain Zero Balances

Once you’ve moved out of your credit crisis, maintain your credit card habits. Save your credit cards for legitimate emergencies and stick to cash, otherwise you run the risk of rebuilding your debt and falling into another crisis. When you get your statement at the end of the month, pay off the balance in full. If you can’t afford to do so for budgetary reasons, discontinue use of credit cards and make incremental payments until the balance is paid off in full.

Use a Credit Repair Service

If you have the flu, you go to the doctor. If your car is making a funny noise, you go to the mechanic. Similarly, if your credit is in poor shape, your best bet is to consult with a credit repair expert. Because they specialize in repairing credit, credit repair agencies are able to identify problems with your credit and fix them faster than you might be able to do yourself. Plus, they’re better equipped to deal with reporting agencies and may be able to find problems that you may have overlooked. Call the number below for a free credit report and consulting.

Want more tips and tricks on how you can repair your credit? Check out our credit repair website.

The information on this page is not intended to be legal advice. Our participating providers will offer an individualized consultation to determine the right services and products for you, if any.

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