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Credit Repair Tips

Want to Improve Your Credit Score? Pay Bills On Time

There are steps you can take to avoid financial trouble or at least minimize its effect on your life. The first thing each of us should do is to have a planned budget for our finances, as well as saving money for many of our purchases instead of buying most things on credit. If you don’t know how much money is coming in and going out each month you have a recipe for disaster. Your first step should be to list all of your income sources, and all of your bills and payments for the month on a sheet of paper. If your bills are more than your income you are already in trouble. Hopefully after listing all of your bills including food, gas, and entertainment you will at least have 30% of your income left over to put into a savings account or rainy day fund. If this is not a possibility you basically have two options, either you need to generate more income or reduce some of your liabilities. Ways that you might be able to generate more income are to get a better paying job or even second part time job, sell some of your possessions that are not needed, or even take on a roommate to lower your monthly expenses.

The next part of your plan would be to go through your list of bills and payments and break them down into to lists called WANTS and NEEDS. You definitely need a roof over your head with electricity, and water service. Food is definitely a need. Many people will consider their auto mobile and cell phone as a need, especially if you must have them for your job, but you need to be honest with yourself. Can you take a bus or train to work, can you carpool with a friend. If you must have a cell phone for work see if your employer will pay for at least part of your monthly bill. Find ways to lessen you food budget by not eating out often and using coupons at the grocery store. Find ways to lower your electric bill by adjusting your thermostat and turning unneeded appliances off in your home. Insurance can be both a WANT and a NEED. If you own a home or car you will need to insure them, and health insurance will keep you out of financial difficulty if you have an unexpected illness. Make sure that you are not over insured and when it comes time for renewal shop around to see if there are better deals. Remember, the higher your credit score the less you will pay for insurance of all types!
Let’s talk about your WANTS. These are items that you do not need to have to live, they may make your life more enjoyable but you do not absolutely have to have them. Things like Cable TV, Internet access, Gym or Health Club Memberships, Beauty Salons, Second Car or Phone Line. These are item that may be reduced or eliminated to help keep the budget in line. These may be tough decisions for you, but it is better for you in the long run to reduce or eliminate these payments than to pay your bills late and get Late Pays, Charge Offs, and Collections showing up on your credit report.
If you have gone through all of these steps and still find yourself having financial difficulty see if you might be able to get some temporary assistance from family, friends, or even possibly your church or a local charity. If you’re financial troubles are going to be with you over the long term you may need to see if you are eligible for some type of Government Assistance like welfare, food stamps, or housing assistance from the Department of Housing and Urban Development (HUD).
When you have truly done every thing in you power to reduce your bills, or you have an unexpected event in your life that is going to prevent you from paying your bills on time, there are still thing you may be able to do to lessen the effect on your life and your credit scores. The first instinct we all have when we cannot make a scheduled payment is to avoid our creditors and hope they will go away. We all know that they never do. It is in our best interest to call your creditors prior to your due dates and let them know you are having problems and see if they are willing to do some type of work out plan that will be in the best interest of both parties. Not all creditors will be willing to work with you but some will, you do not know until you try. If you just don’t pay your bills you know your credit will be damaged. By calling your creditors you may have a chance for a work out, or at least they might give you more time to pay. Many times a Mortgage Bank, and Auto Finance Company might let you make interest only payment for a short time and roll the principal payments into the back end of the loan. This may give you several months to catch up on your bills.
Sometimes in life even after you do everything we have discussed you are going to have too much month at the end if the money. If this is the case deciding what bills you should pay, and which ones you shouldn’t can be very important for your overall financial health. Your first priority should be your secured debt. Secured debt is loans that have been secured with some form of collateral. Examples of secured debt are your Home Mortgage and Auto Payment. If you do not make these payments the creditor has the legal right to take back the property that secured the loan. This can lead to the Foreclosure of your home, or Repossession of your vehicle. These should be your first priority because you need a roof over your head and transportation to your job. Remember that if these secured loans require insurance coverage as a requirement of the loan you will need to make sure that these payments are made as well. The next priority would be your utilities like electric and gas. Call the utility company to see if they may have some type of short term assistance program. Your last priority to pay is unsecured debt such as credit card payments or the items listed in the WANTS column in your budget. While missing these payments will negatively affect your credit, these creditors cannot take back any property that was purchased as unsecured debt.
In summary: Always pay your bills on time for a healthy credit report. Create a budget for you and your family. Start or add to a savings account or rainy day fund for difficult times that may pop up in the future. Save money for the things you need to buy instead of buying most things on credit. This is the beginning of a brighter financial and credit future.

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