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Credit Repair After Unemployment

Oct - 31 - 2012

If you have been unemployed for some time, your credit rating has probably been affected. Maybe you forgot to pay a bill, changed your address and missed a bill or you made a partial payment on an account that was flagged as delinquent anyway. The first step is to find out what your credit looks like by obtaining a current credit report.

Get your score

There are several places online where you can get your credit score, such as Annual Credit Report. If you've already received your free report, go to Equifax, Experian or TransUnion and pay a small fee for the information.

Once you get your report, make a list of creditors that have recorded negative information about your credit, the accounts, amounts due and last payment made. You can then work with those companies to rebuild your credit.

Make a list

Add every bill and account that’s behind to your list of creditors. Sort the information into two categories: accounts that are and are not being handled by a collection agency. Focus first on your delinquent accounts. While all debts are important, you will want to handle delinquent debts sooner than later to prevent further damage to your credit.

Create a budget

Determine what your monthly income and expenses are and how much you can afford to pay on your debts. Make a simple budget to see where you are. You may be spending money that can easily be saved and funneled towards your bills. Spend a week writing down where every penny you spend goes. You may be surprised at what you find. Buying a latte and the newspaper at your favorite coffee shop every morning could run you $120 a month -- money you can save for your bills by making coffee at home and getting your news online.

Contact your creditors

Call the companies to whom you owe money and negotiate payments you can afford. Even though creditors can be demanding about wanting their money, most companies will be happy to work with you. Figure out what amounts you can handle and stick to it. Pay the most you can on each account without negatively affecting your budget. Paying off your credit cards and student loan debt is obviously important, but not if you have no money left over for food and gas. Consider taking out a short-term loan to help you if money gets tight.

Get rid of the negative

Contact creditors who have already marked your account as charged-off or delinquent and offer to pay if they will remove the status. Some will and some won’t. It’s worth a try to get that information off of your report.

Add something positive

The best thing you can do to better your credit is to make your negotiated payments on time. After you've repaired any damage caused by late pays, apply for credit from a retail store or gas station. Rebuild your credit by charging small amounts during the month and paying them back in full before or on their due dates. Doing so will help good information appear on your credit report.

Don’t be too rough on yourself for having bad credit. Based on the economy, it’s a situation many people are in. Repairing your history will take some work and you might be embarrassed to speak with creditors, but hiding from your debts is unwise. Take action, make some calls, figure out your budget and begin rebuilding your credit rating today.

A short term loan can sometimes make all the difference in rebuilding your credit

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