How To Get Out of Bad Credit Situation
Your financial health is your responsibility.
Lines of credit and credit cards need to be used
responsibly. Sometimes, how ever, even the best
financial manager can get into trouble. If you
find yourself in the place where you can’t
make payments on your debts there are good ways
and bad ways of dealing with the problem. Make
sure you stay in touch with your creditors don’t
ignore them hoping they will go away, because
they won’t. If you ignore them things just
get worse and cost you more money in the long
Sit down with a friend or spouse and figure
out a reasonable budget. For awhile you might
have to cut back on some luxuries and entertainment
expenses. Try to make the minimum payment on all
your cards while you are working this out. You
might even have to look for more work. A weekend
side job whose money is used exclusively for paying
back the debt is a great way to go.
If you are experiencing financial difficulty
and cannot make payments on your bills, ignoring
the problem by leaving mail laying around unopened
and letting the answering machine screen incoming
calls will only make your situation worse. Putting
off addressing financial issues costs you more
money in interest and finance charges while robbing
you of your peace of mind.
Work out a realistic budget. Do what you can
to increase your income and try to cut down on
less important expenditure. Make sure you are
getting all welfare benefits that you are entitled
Stay Ahead of the game
Pay attention to what you are spending and where
your money is going. Don’t buy consumables
(like gas, food, and clothing) on credit unless
you can pay your bill in full every month. Work
out that budget so you know exactly what you have
to spend and how you spend it. This is the first
step in good financial management.
Are You Sinking?
Anything on this list could mean you are headed
toward financial disaster so pay attention to
- Are you living on payday loans?
- Are you close or over the limit on some or
all of your cards?
- Are you paying bills late, making minimum
payments or not paying bills at all?
- Do you have too much month left at the end
of the money? (read this one twice)
Warning Signs of a Financial Problem
- You are using more and more of your income
to pay your debts.
- You are close to, or surpass, your credit
- You must borrow to make payments on existing
- You only pay the minimum amount on your bill.
- Lack of money is forcing you to pay bills
late or postpone doctor's visits.
- You must work overtime, or take a second
job, to cover basic living expenses.
Why is this happening?
Some difficult questions to ask yourself that
will help you figure out the problem.
How much are you worth? This means adding up
what you own outright (things already fully paid
for), and how much you make per month from jobs,
businesses, alimony or child support.
What are your expenses?
Sort by category;
- Rent or mortgage;
- utilities-phone, electric, gas TV;
- Laundry and dry cleaning;
- Revolving credit, credit cards, payday loans;
- Car payments;
- Entertainment, eating out, movies, concerts.
- Anything else you might buy or spend money
When you have totaled these up you have your
monthly overhead (or costs).
Subtract your expenses from your earnings this
number is how much more money you need per month
if you didn’t change anything else.
Now that’s over and the news is not as
bad or worse than you thought it’s time
to go on a spending diet. Oh ouch, I don’t
want to, but this is the easiest way to start
digging yourself out of debt. Some of these tricks
won’t even hurt, but some might pinch a
Call the creditors:
Don’t hide from them, call and set up
payment arrangements, they will usually work with
you to some degree. If not keep, paying them anyway
even if you can’t send a minimum payment
send them something every month.
Contact your creditor
Contact your creditors to let them know you're
having difficulty making your payments. Ideally,
this should be done before a payment is late or
missed. Tell them why you're having trouble --
perhaps it's because you or a spouse recently
lost a job or have unexpected medical bills. Try
to work out an acceptable payment schedule with
your creditors. Most are willing to work with
you and will appreciate your honesty and forthrightness.
Many have "hardship programs" which
provide for adjustment of payments for a period
Develop a Debt Payment Plan
If you find yourself with more bills than your
monthly income can cover, set up a debt payment
plan. Completing this plan will take patience.
You will have to stick with it until all your
debts are paid. A debt payment plan will work
if you really want to get out of debt. You need
to start getting out of debt right now. Paying
a little back is better than doing nothing or
just worrying about the problem. Paying back a
small amount will give you a sense of control.
It will start you on your way to solving your
To set up a debt payment plan, follow these
- 1. Find out who you owe and how much you
- Decide how much you can pay back and when
you can pay it back.
- Set up a plan for paying back your debts.
- Discuss your plan with your creditors.
- Control your spending by sticking with your
debt payment plan until debts are paid.
- Occasionally, look over your plan to see
if you are keeping up with your debts and your
daily living expenses. If there is a change
in your income, you need to raise or lower your
monthly payments accordingly
You have to admit that you have financial problems
and really want to solve those problems. Getting
out of financial trouble is not easy. You have
to make up your mind that you will pay your debts
within a specified length of time. You have to
be willing to discipline yourself to pay back
the money you borrowed.
Now that you have worked out a plan, destroy
all your credit cards, do not take out any more
loans except in extreme emergencies, and contact
each creditor and explain your plan. Go visit
each creditor. If you cannot visit your creditor,
call or write a letter. Do not send the letter
unless you intend to follow through with the repayment
plan. Remember, creditors would rather receive
a small payment than nothing at all. They also
prefer to have the money than the items you purchased.
Dealing with Debt Collecotors
The Fair Debt Collection Practices Law prohibits
a debt collector from showing what you owe to
anyone but your attorney, harassing or threatening
you, using false statements, giving false information
about you to anyone, and misrepresenting the legal
status of your debts. Remember that under other
federal laws to collect debts, creditors cannot
seize most government assistance and can only
garnish a portion of wages to collect debts.
If you spend more than you make, you should
look at making some changes. Create a spending
plan that allows you to reduce your debts. Itemize
your necessary expenses (such as housing and health
care) and optional expenses (such as entertainment
and vacation travel). Start a savings plan so
that funds are available for unforeseen but essential
expenditures. Stick to the plan.