How to Settle Bad Credit Problems

Debt can be damaging but there are ways to repair your credit.

The average American household has more than $15,000 in unsecured debt. They go onto say that from April 2009 the credit card default rate was nearly 14 percent and the 60-day delinquency rate was nearly 4 percent. Late payments and bad debt accumulates on credit reports, pushing credit scores down. However, even if your credit score has been damaged, there are things you can do to repair it with some time, discipline and patience.

Things You'll Need

• Copy of your credit report
• Copies of all credit accounts
• Paper
• Pencil
• Phone numbers of creditors

Instructions

Settle your bad debts

1. Get a copy of your credit report to figure out who you owe money to and the amounts you owe. You are entitled to a free copy of your credit report once in a 12-month period from each of the major credit reporting agencies.

2. Create a list of who you owe money to and the amounts. If the debts are old, you may find that they have been sold onto a collection agency.

3. Decide how much you can reasonably afford to pay each creditor. If you cannot afford to pay them all at once, then prioritize them and work your way through the list. Have an offer amount in mind before you contact any creditors. Offer a lump-sum payment in exchange for your debt being settled.

4. Get a copy of the settlement agreement in writing before you send any money. Once you have received the written agreement, send the money. Once you have cleared this account, move onto your next one until all of your bad debt is cleared.

5. Check your credit report after the payment has been received. It should note that the account has been settled.

Repair your credit report

1. Check your credit report regularly. Check for any mistakes. If there are incorrect notations, then demand that they be amended.

2. Make payments on time. If you still do not qualify for new credit cards, then make sure you are paying your essentials, such as rent and utilities. Maintaining these can help reopen new lines of credit later.

3. Apply for a small amount of credit. Try gasoline cards, store cards or approach your own bank or credit union. Charge small amounts and pay the balance off each month.

4. Apply for a secured credit card. Place only what you can afford on the card and spend wisely. If used well, secured credit cards can help rebuild your credit.

References

• Credit Card Debt: Credit Card Debt Relief
• Credit Cards:Credit card statistics, industry facts, debt statistics
• Consumer Bad Credit Guide: Where to get Credit if You Have No or Bad Credit