Credit Rebuilding Works Best When You Use Your Brain

Credit Rebuilding Works Best When You Use Your Brain

For years fire fighters have taught us the principle of stop, drop and roll to survive a fire.   When it comes to surviving the credit rebuilding process, there is a similar life giving slogan…stop, think and listen.   If you find yourself being swallowed up by mounting debt, it is critical that you stop for a moment, take time to think about your situation and be attentive to the activities being reported on your credit report.   The greatest credit rebuilding resource you have is the one between your ears.  Let’s start by taking a look at what can happen when you have bad credit as well as the steps you can take to protect yourself and your family from the creditors and collection agencies.

If you are obligated to pay child support, college loans or income tax, the  government can take your money. This means each year you miss payments on these items you are considered in default and steps can be taken to seize your wages, in an effort to satisfy these debts.  In the case of back taxes, the IRS is obligated to notify you prior to deducting any fees from any tax refund you may be eligible to receive.

Use Grace Periods To Develop A Credit Rebuilding Strategy

If you have late bills on utilities, under law (in most states) the utility providers cannot cut off your heat during particular months stated in the law regardless of nonpayment.  In most states the utility companies are required to give you a written notice before they can disconnect your service. This will give you time to find the funds to pay your outstanding utility bills.   In a similar fashion,  most insurance policies will allow you a grace period .  Anytime you are given a grace period,  it is time to stop, think and listen. If in reviewing your bills and income, you conclude that you do not have enough to pay the entire balance due of the bill, you might get away with making a partial payment.   Paying something toward your bill is always better than avoiding your obligations altogether.

Credit Rebuilding Works Best When You Communicate With Your Creditors

Another point you want to keep in mind is that when creditors write off a debt,  you may be required to pay taxes on the bill. Once a creditor writes off a debt it is sent to the IRS for review and if they choose to do so, you will still pay on that bill at the end of the year in the form of tax due on unreported income. So your best bet is to write the lender or creditor and explain your situation politely, asking them for an extension on payments. The truth is most creditors that lend or extend you credit, hope  to retain you as thei long term customer. Keeping the creditors on your side is your best solution for avoiding further complications. Another suggestion is to send in partial payments on current bills that are overdue. Your next bill will be steep but if you keep sending payments until you are caught up, no derogatory information will generally be be added to your credit history.

If you have an overdue bill and have the money to make a payment, tell the creditor that you will send the money through regular mail immediately. Do not waste money on services that will charge you to make an expedited payment.  If you contact the creditors and they deny you the opportunity to extend your debt or ask for proof of your situation, it may be time to make contact with a Debt Counselor.  The Debt Counselor will work on your behalf to resolve the issue.

By taking the time to stop, think and listen, the process of credit rebuilding will go much more smoothly, allowing you to increase your credit score and once again be on top of your finances.

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