The Credit Challenge

As you may know, people want to fix their credit right now.  Many people are losing their jobs or going through a foreclosure.  Gas prices have made money a little tighter and many people are falling behind on their bills.  This can be devastating when it comes to their credit report and credit score. 

However, I want you to know there is still a way to fix your credit even under those situations.  The problem is that people often lose hope and are paralyzed when it comes to paying their bills on time once they get the news of a foreclosure or other big events like that.  That leads me into the one thing that you want to avoid when you fix your credit.

First, let’s start off by talking about the behavior that occurs when you start paying late (for most people at least). 

Say I get into a situation where I can no longer afford my mortgage payment and all of a sudden my house goes into foreclosure.  This may cause tons of stress and anxiety for me so I figure that I’ll just give up on all my bills and obligations. 

I stop paying everything at this point; my mortgage, credit cards, car loan, and even my utility bills because my house is about to be taken from me.  Guess what happens next?

My credit score plummets to the depths of the sea!!!  I have late payments on everything now.  This is the major mistake that people are making in this desperate time. 

Now, here’s the BETTER WAY to handle this situation and one you can learn from to help yourself and your loved ones not to completely destroy their credit.

Again, let’s say that I am losing my home.  I call the bank to see if there is anything we can work out rather than just dodge their calls.  They may or may not be able to help, but at least I tried.  So let’s say that there’s no other option than losing my home.  Sad, but OK in the long run.

Now, here’s where the magic takes place.  

Although the mortgage company is taking my house, I decide to keep paying my credit cards on time, my car loan on time and everything else on time since there’s no hope in keeping up with my mortgage payment.  KEY – PAY EVERYTHING ELSE ON TIME!!

The reason that you want to do this is because you will still have available credit in good standings to help fix your credit after the foreclosure.  Even though you have late payments on the mortgage and a foreclosure, you still have the credit cards and car loan (or any other credit you may have) that you have been paying on time and is still in good standing.  Over time, the good history on these other accounts will help you slowly boost your credit score higher and higher and help fix your credit.

Compare this to someone who loses hope completely and stops paying everything.  They have late payments on every account, a foreclosure on their home, collection accounts from the other credit they stopped paying, and all the credit cards have been closed by the creditors for lack of payment.  What do they have left to build on?  Absolutely nothing!

While you just continue paying your open accounts on time and showing the credit agencies that you can still handle credit in a timely manner, the other person is desperate to fix their credit but has no open accounts in good standings to build off of. 

They must try hard to open new accounts to re-establish themselves and fix their credit.  This may take several months or even years to accomplish.  You on the other hand don’t have to worry about that because you paid everything else on time, other than the mortgage, and you continue to have open credit in good standings.

So, the one thing that you want to avoid when you fix your credit after an event such as a foreclosure is to stop paying on all your other accounts.  As long as you continue paying everything else on time, you have a 99% better chance to fix your credit much easier and faster than all the others that decided to give up on all their expenses.

I hope this has been helpful and has opened your eyes to see that your credit is not doomed forever if you go through a bad financial time.  Do it intelligently and with some tact, and you will be back on your feet much sooner than most others.

If you are interested in learning more of these tips and tactics to fix your credit or boost your credit score, click Fix Your Credit to get this valuable information emailed to you.