Now's the time to devise
a spending plan that reduces your debt and sets you up to pay
on time, every time.
If you're having difficulty making payments, be proactive.
Call your creditors and negotiate to keep your accounts current
and from being reported as delinquent or "bad debt." You
can ask for reduced monthly payments, or even change due dates to
balance out your monthly bills.
The same strategy can be used for fixed-loan payments.
Remember, though, that this is a short-term strategy. You'll pay
more interest to extend the repayment schedule, but it allows you
to stay current and save your credit rating. Use the extra money
to pay off debts one at a time, gradually increasing payments to
other debts.
Check out Bankrate's 10
steps to paying off credit cards for more ideas.
Deal with any collection accounts. Unpaid collections
are worse than paid collections. You can negotiate a pay-off settlement
that reduces your bill, plus demand that all derogatory remarks
are removed from your credit report or at least reported as paid
in full. Be sure to get verbal agreements in writing before sending
off your payment.
Slowly close out unneeded or unused credit accounts.
Most experts recommend carrying between two and four major cards.
But, be cautious when canceling because closing accounts can negatively
impact your credit score, commonly called a FICO score. FICO considers
the ratio of total debts to total available credit. A good rule
of thumb is to keep your revolving debt to 50 percent of your available
credit.
Remember that cutting up the card doesn't close out
the account. Here's a step-by-step
guide to smartly close out your account.
Other tips:
- Close out your newest accounts so that
you don't lose your longer credit history.
- Close out accounts slowly over several
months.
- Verify that all accounts you've closed
are reported as "closed by consumer" for the best report.
- Even if creditors offer to raise credit
limits, allow yourself only moderate credit limits.
- Keep your balances low and avoid revolving
balances.