#54b Credit Part 2: Fixing Your Bad Credit


It doesn’t have to be a game changer or the spoiler to a good plan.  However, “bad Credit” has the power to possibly stall, complicate or even prevent your financial progress toward large, significant transactions such as purchasing a home.  So, it needs to be fixed!   Let’s just start there and work through the challenge.

As I discussed in “Credit: Part I: The Value Of Credit” professional help and guidance can get the situation under control.  Of course, you’ll have to do the work, but the right guidance will assure that the remedial work you do is appropriate and effective.

If you can come to see clearly that Credit, in good condition, is a valuable, essential, powerful factor for your financial progress, you will be able to feel better and more confident about the task of fixing the problems.

So, what are the individual problems and how do you proceed?

For many, a major factor can be that you are trying to function financially above the actual capacity of your earnings and income.

Credit cards – often easy to obtain – can be a blessing that becomes a curse!  Too often, a person can begin to regard the credit limit on a credit card as an addition to their actual earnings and income.  Unfortunately, that’s a dangerous assumption – and the main reason it can all get out of control.

When the situation escalates (often involving multiple Credit cards) it leads to several risky patterns:  late payments, over-limit activity, minimum payments only, and even missed payments.  Any one of those patterns is, quite simply, a can of worms and may become difficult to reverse!

Along with Credit cards, there are other financial indicators that affect your Credit, such as accounts that have been closed for bad payment patterns and placed in collection.  Even if you chose to close an account and “pay it down” over time, the effect is negative.

The fix for a bad Credit profile begins with a hard look at those negative patterns I mentioned.  It is clearly time to take those troubled Credit cards out of wallet or purse, stash them in a file at home and focus on the monthly statement only until you get it or them under control. 

Drive the balances down by avoiding new charges and making conscientious payments.  Try to pay even a modest amount OVER the minimums required.  Also, notice that even though you are not adding new charges, the Credit company is!  The interest on the balance goes on and on.  However, with new disciplines they won’t be adding late fees, over limit fees or underpayment of the minimum fees!  And, the interest payments will be lower.

If you decide to work at establishing new financial behavior patterns, there will be ripple effects!  You would have to begin spending within your actual means, and that might not be an easy transition.  Depending on your personal status – single, married, married with children or other dependents, or any other relationship where your finances are co-mingled – the tough adjustments will impact others and will vary in terms of management.

The impacts of changing your financial behavior may even present some personal conflicts.  Call it tightening the belt, cutting back or just being more frugal and establishing new disciplines.  In any case, it will touch those close to you with whom you are financially connected.

If you are presented with an opportunity to “help” someone by co-signing their financial documents – don’t!   Their debt becomes your debt, and will have an impact on your own financial profile when seeking a home mortgage loan.

Overall, with professional guidance, you will be able to review all of your financial and money management situations, habits and realities.  Together, you will be able to find workable strategies and develop action plans that can lead to your home mortgage loan.

Don’t give up!   It’s a fact that your home mortgage loan officer probably knows more than you do about the remedies!  Get the available help you need – and fix your bad Credit!

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