Credit Repair: Stop The Downward Trend

by Brad Morgan

Credit card offers can be very tempting, and we certainly get enough of them in the mail everyday. Even people with poor credit scores are inundated with these “pre-approved” offers.

Everyone should have a credit card for emergency use, you tell yourself. It just makes sense. You hang on to one or two of these offers, just in case you decide to get one.

They tempt you with excellent terms – no annual fee, a great APR for the first year, zero percent balance transfers, high limits. You can even design your own card or personalize it. Imagine carrying around a camo credit card? Or one adorned with stars or puppies? Just for emergencies, though.

You may apply with the intention of using it strictly for emergencies. Isn’t that a safe and responsible thing to do, you say to yourself.

While you wait for your card to arrive, you fortify your intention of using it only when absolutely necessary. You won’t borrow money to pay for extraneous and unneeded items.

You won’t be tempted by the personalized card, the great rates, or the high balance. You’ll use it for necessary items and pay the balance each month.

Once you diligently read the terms, you get right on the phone and activate it. This is a great step towards financial responsibility.

Now that you have the credit card in hand, ready to go, your mind drifts to what you can buy with it. You’ll definitely pay the balance in full each month, so a few little purchases won’t hurt. And isn’t it better to use it and pay it off than to let it gather dust in your wallet? A few small, inexpensive items, and then only for emergencies.

The first payment slip comes in from the bank. It is asking for a number dangerously close to the number on your pay check.

This where you lose control. Rather than paying off the total due, you pay a portion. You continue to use the card to its maximum potential and again pay only the minimum.

You are driving yourself deeper into debt. Soon, your credit card will have reached its maximum balance. This can leave you in a financially vulnerable position, so you get yet another credit card. Without changing your spending habits, however, you are just perpetuating the problem. Soon, you have to maxed out cards and are making only minimum payments on each.

Now you are buried in debt, and to make it worse, the low, tempting APR rate has expired. You may go from zero percent to in excess of twenty percent. If you miss payments, it continues to climb. Your debt grows on its own, even if you stop using the cards.

You go on paying your minimum payments, ignoring the damage to your credit score. You’ll pay it off eventually, right?

After the holidays, you think, I will pay them off. When I get my tax returns, I will pay them off. You do not pay them off.

Soon, you have financial obligations that are pressing on you: how will you pay your heating bill in the winter? How will you pay for the increase in gas and commuting costs? What happens now if your car needs repairs? All that, and creditors calling and sending overdue notices. You cannot pay your debt. You no longer have control of your financial situation, and this affects every aspect of your life.

Start boldly and decisively to take back control. Take your three credit cards and cut them up. Be merciless. If you work hard to pay them down, you don’t want the temptation to start using them again. Once you’ve paid them off, you want them out of your life.

But what about emergencies, you think. I need to have a credit card. If you absolutely feel you need a card, choose one. Pick the one with the best terms and work on paying it off. No more minimum payments. Even ten percent more over the top of a minimum payment can help you pay it off faster. And this time, emergencies only. Buying dinner out for friends is not an emergency. A great shoe sale is not an emergency. Paying for your car repairs when you break down on the side of the road or buying a new water heater are.

Your next step – and you’re not going to like it – is to talk to your creditors. Their goal is to recoup their money: if you cannot pay the entire amount, they would rather get something than nothing. Most will be willing to work out a repayment plan that you can afford.

Work out a payment plan with them that you absolutely know you can pay. Realism is the foundation here.

You were living in a world of money that you fictitiously owned. The reality is that money was real, and you really do owe it back to someone.

Time allowed this debt to get out of hand, and time is required to get it back in control. This problem will not dissipate overnight.

This can be frustrating as you pay and see no immediate effects. But as you continue your efforts, you will see both your debt load decreasing and your credit score increasing. In a year, you could significantly decrease the amount you owe, or you could let it continue to grow exponentially. The choice is yours.

Credit repair requires an immense amount of honesty with yourself and your creditors. It can be an uncomfortable position to be in, but if you learn from your debt mistakes, then you can start making real progress towards improving your financial life.

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