Dealing With Credit Problems

2007-03-08 10:33:40

( Financial )



A good majority of Americans have both happy and sad experiences with debt and credit, due to the unpredictability of the country's economic and social environment. While you may be currently enjoying a high paying job, it is still possible for you to lose it next year even if it wasn't your fault.

Consequences of Debt Problems

A change in fortune can wreak havoc not just on your daily budget but also your credit record. And as your ability to pay dwindles, your credit problems escalate.

Suddenly you are unable to pay your credit card bills and your mortgage dues. Your creditors come knocking, often rudely, to demand payment or they refer you to a collection agency which will treat you even worse. Ultimately you get subpoenas from the court and consequently a black mark on your credit record, which then destroys your chances of getting a new loan or credit facility. Worst of all, you can lose that beautiful home or car that you have worked so hard to maintain, as well look forward to possible jail time.

Helpful Strategies for the Debt-ridden

The first thing you need to remember about your predicament is that there is still a silver lining.

Make a list of all your debts, the exact amounts you owe and to whom. Then rank them according to urgency. Check which ones may cause you to suffer severe penalties if you neglect them, particularly mortgage loans, rent, and taxes.
Obligations with less priority and therefore can be held off for at least a little while longer are credit card bills, catalog bills, utility bills (which are extendable), and money owed to friends and family.

Now that you have ranked your debts according to priority, work out a debt repayment schedule that should be compatible to your weekly or monthly expense budget.

Talk to each creditor, and be open and honest with them about your situation. Offer to pay even just a small amount that you can afford or ask for extensions if possible. Always document your negotiations with them by a confirming letter.

If you're too cash-strapped to hire a competent lawyer, you can look up various debt assistance centers online like National Debtline for free advice and assistance. There are numerous organizations such as the Citizens Advice Bureau you can find in the phone book or online. Depending on the nature of your credit problems, these agencies can give you advice directly or at least refer you to other entities that can.

Once you have figured out the best debt consolidation or other solutions to your credit problems, follow them faithfully. You do have the responsibility to look for possible sources of repaying your obligations, such as finding a new job or selling off a non-essential piece of property.

As long as you keep up your efforts in doing something about your debt problems, it won't be long before you'll put your credit problems to rest.


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