RESOLVING CREDIT PROBLEMS

My husband and I have been married for almost 7 years. We moved to the city because in a small town we could not make ends meet and have very bad credit. After discussing the possibility of bankruptcy we decided we wouldn't but we still can't seem to make ends meet and we both have decent jobs. What kind of advice can you give me on what I can do to manage money better, and clean up our credit? Any advice appreciated. Thank you.

The key to resolving credit problems is self- discipline. Mechanisms are useless unless you change the conduct that got you into financial difficulties to date. Your move to another location and the improved income is a positive.

Some suggestions:

1. Cut up or lock up credit cards and agree that that credit will not be used except in emergencies.

2. Cut out all luxuries, including cell phone calls and dinners out. Stop them cold! Sit down make a list of things that can be cut out. Revue each other’s list. Set strict spending limits. Carry little or no discretionary cash. (Always carry “emergency” money.)

3. Increase revenue. A low paying part time job may parch your ego but save your credit.

4. Contact your creditors and ask if you can get a lower interest rate while you are trying to catch up on payments. Rates can drop to 6% on request.

5. Explain your situation and ask for a different payment plan that will lower your monthly payment. Credit card companies realize that bankruptcy can cost them all the money you owe. They often will settle for a lower payoff amount. Seventy-five percent of the total is fairly east to negotiate, but when forced to decide between a lower percent, or nothing (as in bankruptcy), they might be inclined to negotiate.

6. If you get debt forgiveness, the amount forgiven is considered taxable income.

7. Do not ignore payments. Pay any amount you can afford on monthly accounts.

8. If possible, switch debt to the lowest interest rate credit card. Although not likely under the circumstances, if you are solicited from credit card companies with a low “teaser” rate, move debt there.

9. Do not switch debt to any equity line, yours or any other party. You do not want to place collateral under credit card debt.

10. Sometimes family assistance is available, but borrowing from friends or family is not generally a good idea. Credit can be restored emotional ties can be irretrievably broken.

11. There are books available at the library and bookstores that address credit problems.

12. There are credit resolution services available.

13. Contact an attorney before contracting any service or plan that is not fully clear in all respects.

Good Luck,

Everybody’s Uncle