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907. I got in trouble and ran up a lot of debts I couldn't pay, and now my credit report looks awful. How can I get credit?




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This article is from the Credit cards and Consumer Credit FAQ, by adams@spss.com (Steve Adams) with numerous contributions by others.

907. I got in trouble and ran up a lot of debts I couldn't pay, and now my credit report looks awful. How can I get credit?

Well, lenders grant credit based on how likely they think you are to
pay off your new debts. If you have existing debts that are
delinquent, you're not really a good risk. The best way to become a
good risk is to clear off your old debts. There are several things
you can do.

Many cities have consumer credit counseling agencies that will help
you develop a plan to pay off all your debts. (Usually these are
free, run by the government or by public-interest groups. They are
not the same as "loan consolidation services" that are actually
for-profit finance companies.) Most will suggest that you cut up
all your credit cards and not take on any new debt. They may help
you negotiate with your creditors to work out a payment plan that
you can meet, or they may coach you on how to talk to your creditors
directly. Most lenders would rather get something than nothing. If
you seem to be honestly trying to pay what you owe and if you have
communicated with them, they may be willing to be patient rather
than turn your account over for collection.

If your circumstances have changed abruptly -- lost your job, major
health problems for yourself or your family, etc. -- it's best to
visit your creditors before your accounts are past due. Explain the
situation directly, let them know that you do intend to pay the
debts but need to work out reduced payments, then make those
payments on time.

{Your Credit Rating} suggests, "You may want to place a statement in
your file, also, to explain a period of delinquency caused by some
unexpected hardship, such as serious illness, a catastrophe, or
unemployment, which cut off or drastically reduced your income."

If you're really over your head, you may have to declare bankruptcy.
Talk to a consumer credit counseling service before taking this
drastic step, and check some self-help books out of the library.
They will help you decide what you need to do and whether you need a
lawyer.

 

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previous page: 906. My spouse and I had joint credit accounts, and s/he ran up a lot of debts. Now we're divorced, and I want my ex's debts off my report.
  
page up: Consumer Credit and Credit Cards FAQ
  
next page: 908. Are "credit repair" agencies legitimate?