Your credit score can stop you from obtaining employment as well as renting an apartment. Maintaining a good credit history is very crucial to your survival. However, there are certain circumstances in life that are almost impossible to avoid -- the loss of a job due to illness, being laid off, and for the self-employed, loss of income. If you are one of these unfortunate people, these tips will help save your finances and get your life back on track.
Credit Bureaus
Write a letter to your credit file at the national credit bureaus and explain why you were late with payments because of illnesses or loss of job, etc. You cannot erase past credit marks but you can explain your situation and hopefully make creditors more understanding when checking your credit report. Notifying a local bureau will not change your records at all locations but, because the national bureaus are clearing houses, changes will be reflected on all future requests they receive from small bureaus.
Creditors
Contact your creditors by letter and inform them of your situation. Offer to establish a new payment agreement. Often creditors will work with you on what you can afford. Settlements show up on your credit report so only make a settlement if the creditor is unwilling to make payment arrangements with you. Sample letters.
Student Loans
If you default on your student loan, the maturity of each promissory note is accelerated making the payment in full due, and you are no longer eligible for any type of deferment or forbearance.
Continued failure to repay a loan in default may lead to several negative consequences for you over the long term including having your wages garnished, your federal income tax withheld, and loosing your eligibility for other federal aid like FHA or VA.
However, there are many ways than ever before to repay your defaulted loan. Certain programs can even remove your loan from its defaulted status.
- Repay or satisfy the loan in full
- Make six agreed monthly payments over a six month period and continue making payments on time.
- Consolidate your loan and make six agreed upon payments on time over a six month period.
For more information and questions on repaying your student loans, contact the National Repayment Center at 1-800-621-3115
Credit Cards
To establish credit, almost everyone needs a credit card. This is an important way of establishing credit. If your current credit is so bad that you have been unable to obtain one, there is help available. Most cities have a privately operated agency that specializes in obtaining credit cards in these cases. These agencies do not charge for their services if they are not successful. Look for them in the Yellow Pages. They will often advertise in the classified ad section of your local newspaper and in major national newspapers like USA Today and The Wall Street Journal.
Even if you have been denied a credit card by one of the large credit card companies, your should still be able to get a national credit card on your own. Try a local furniture store or appliance outlet and try to open an account up there. Because you live in the area, a local store might be willing to extend credit.
Banks
Approach a bank which offers Visa or MasterCard about opening up a charge account for you with a credit balance. Fill out an application for the credit card you would like to recieve and send the application along with a check for $300 to $500. Request that they extend that much credit to you. You are paying in advance for charges you will make in the future. No credit card company should reject that kind of an application.
When your account balance has been used, the bank may extend your credit limit, without another deposit of money. BE SURE to pay on schedule so that you take advantage of this opportunity for establishing a good credit history.
Money Market Accounts
Another way to improve your credit is to go to two or three banks and open up a money market account in each. Find out the minimum amount for an installment loan each bank will make. Then, use at least that amount to open the accounts. If the minimum loan is $1000 per bank, open each of your money market accounts with $1000.
About two weeks after you have done this, go back to each bank and ask to borrow the same amount of money you have on deposit. Offer to collateralize, or secure, the loan with your money market account. Make sure that each loan is an installment loan, of six months or longer. That way you can be certain it will go on your credit report. Bankers are usually comfortable granting these loans because the collateral is right in their own bank. If the loan is not repaid, the banks has access to the money market account, making the bank's risk minimal.
When you have secured a loan at each of the two or three banks, take the money you borrowed and put it into another interest bearing account . You will use that money plus the interest to help pay back the banks.
A week later you will receive a repayment coupon book from each of the banks. Every Friday for the next three to four weeks, tear off a coupon and make a monthly payment. Make your payments every month until the loan is repaid.
Not only have you retired the loan faster than the period for which the loan papers call, but you also now have two or three banks that you may use as reference. Once you have completed this technique, go back to the same banks and apply for a $500 unsecured loan for a period of 60 or 90 days. Be sure to repay them ahead of schedule.
Reference:
Sheets, Carlton H. How To Buy Your Home or Investment Property with NO DOWN PAYMENT: STEP-BY-STEP MANUAL & CASSETTE TAPE LIBRARY. Illinois: The Professional Education Institute
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