You made a big mistake - ignoring the problem doesn't fix it.
Okay, you weren't careful - got carried away with your credit, and now the card is at its maximum limit and you have not been able to make more than the minimum payment... every couple of months. So, you applied for another credit card that promised no interest for a year. That has helped, but, next month the year of no interest expires and now you have TWO credit cards that are maxed out and you have no way of paying them down.
You are contemplating applying for a third credit card to help with the last two. The circle of debt has begun and is not about to change. Ignoring it won’t fix it. The longer you are delinquent in even your minimum payments, the lower your credit score is. You have a full-time job, make decent wages, but you just experienced a very serious lapse in judgment.
That gnawing feeling in the pit of your stomach grows with each day and panic hovers as a constant umbrella. You know that you will not get a loan of any kind with fair - to bad credit. No car loan - no personal loan- no moving expenses loan - no mortgage - nothing. You feel trapped and the worst part of it is that you trapped yourself. All because you just weren't careful with your finances.
The American Dream - Dream Big - Spend Big
One of the pitfalls is that we idolize the rich and famous. We follow their lifestyles, watch how they dress, live, eat. We as a society are surrounded by the American Dream - get rich, become famous - you have arrived. When we begin to compare our lifestyle to theirs, it is easy to begin to emulate them - after all, if we are like them it must mean we will be happy and loved. But, this in itself is not the truth. Regardless of how much money one has finances must be managed and handled properly. If I buy designer clothes - I will be happy. But, if I really cannot afford designer clothes, then I should opt to purchase what I can afford. Happiness and confidence come from the inside out, not the outside in.
Owning it - Accepting Responsibility
Did you know that you are not alone? Experian, one of the largest consumer credit reporting agencies, estimates that 30% of all Americans have poor or bad credit. That means they have a credit score lower than 601. Being surrounded by 30% of Americans is comforting, BUT, it still doesn't help you get out of debt or help you get financing when you really need it.
What do you do?
Your credit score is between 500 to 600 which is considered a Poor Credit Score by Private and Institutional Lenders. 601 - 699 is considered fair and should you be approved for a small loan, you will find that your interest rates are much higher than those who have good to excellent credit.
Reading about bad credit still doesn't help when you are looking for answers and places to go. Especially if you now need a car loan or one of your appliances died. It is really easy to fall into the trap of blaming circumstances, work, people for our bad credit but at the end of the day regardless of how it happened, YOU are the one with the fair - bad credit score.
Blaming will not fix it. Crying about it will NOT fix it. The only one who can fix it is you.
It is hard to admit we have 'failed' at something so major as our finances. The shame we feel, the anger, makes us want to pretend to the world that everything is okay. Or we become the eternal victim needing help so we are not responsible. We have sleepless nights. We take out our fear and frustration on those we love, but nothing will change unless.....we change.
Unless-we-change. Unless -I- change I, personally have found that once I 'own' the thing that I fear or am running away from - when I finally admit it- it completely loses its power over me. I can start to think clearly and formulate a plan.
Step by step. Day by Day. Owning that I have a problem managing my finances. Owning that I need help. Being my own adult, accepting the consequences and begin to dig myself out. No one else can do this for me. Only me.
Steps to repair your finances
- Admit you need help and that ignoring or procrastinating is only making it worse.
- Make a list of all your monthly expenses. Mortgage or rent, vehicle, loans, gas, food, utilities, minimum payments on Credit Cards and other loans, eating out, clothing, miscellaneous items, coffee and specialty drinks. Do Not leave anything out, especially if you really want to increase your credit score. Hit thelink below to download a personal budget spreadsheet.
- 'Personal Budget' spreadsheet
- How much money do you bring home every month? This is the net amount - what you make after taxes have been deducted. Subtract all of the expenses that you have listed in Point #2 - how much is leftover?
- What can you change? Look at all of your expenses and decide where you can honestly cut back. It may be eating out. Rather than cut eating out altogether, allow yourself to eat out once a week. Is specialty coffees consuming your 'extra cash' - allow yourself one or two specialty drinks a week, not twice a day or whatever it is. Entertainment, alcohol, shopping..... Now is the time to be realistic and disciplined. Once you decide what you can 'trim' off your monthly expenses. Then apply the extra cash to making payments on outstanding debt.
- BE CONSISTENT and BE ON TIME in making your monthly payments.
- It will take time, BUT you can dig yourself out.
Sometimes, even your best effort won't dig you out. Then what do you do? Do NOT Give UP!!!! You can get professional help. What would a credit counselor do?
Advice from a credit counsellor
- Can call your creditors for you and negotiate a payment schedule
- Call Now: 877-672-1570
- Can help you consolidate your existing debt into one payment
- Can help you negotiate a better rate so you are paying off more than the minimum payment
- Can help you start a savings plan for other emergencies and your retirement
- Be persistent - Fight for you and your financial stability
- It is easy to give up and keep hoping things will change. They won't. Nothing will change until you change it. Surviving is not fun even if it is only short-lived. Take the first step towards building a strong credit score and a life. No one else can do this for you. Only you can. Stop living in the 30% of all Americans that have poor credit. Be part of the 60% with good to excellent credit.