Programs for Rebuilding Your Credit

Bad credit is generally the result of having high amounts of debt, spending more than your credit limit and paying your bills late or not at all. Consequently, bad credit can make you miss out on receiving job offers, moving into a first-choice apartment or securing a large loan, like a mortgage. Programs that can help you improve your credit score can also help you eliminate debt and learn money-management skills.

Debt Consolidation Programs

Debt consolidation programs, also called credit card consolidation programs, can help rebuild your credit. Consolidation programs provide you with a large loan to pay off your debts. In return, you repay the consolidation program. By having the program pay off your creditors, you will only owe money to one lender, the debt consolidation program, which can look good on a credit report. Therefore, you can start rebuilding your credit by sticking to a budget and paying the debt consolidation program and your other bills on time. Debt consolidation programs are best for those who know how to manage money well, do not plan to accumulate credit card debt and have a plan to repay the consolidation program.

Credit Counseling Programs

If you are not sure how to effectively manage your money and pay your debts, you could benefit from a credit counseling program. These programs evaluate your spending habits and debt-to-income ratio and help you create a manageable budget. According to the Federal Trade Commission (FTC), the best credit counseling programs are those certified or licensed to offer you financial advice. When you learn how to use your money wisely and spend within your means, you will set up a system that helps you remember to pay your bills on time, eliminate your debts and begin saving for a goal, such as a vacation or down payment on a house. Lowering your debts and increasing your savings will yield a smaller debt-to-income ratio, which will help improve your credit rating.

Debt Settlement Programs

A debt settlement program is a good program to consider if you are experiencing a financial hardship and cannot pay the monthly minimum amount you owe to creditors. In this type of program, a representative will contact your creditors on your behalf to lower the interest rate you are charged or the total amount of debt you owe. There is a risk that debt settlement could hurt your credit rating if a creditor indicates on your records that you did not repay the full amount owed. Therefore, it is important that the representative assisting you makes sure this does not happen to you so you can eliminate your debts and rebuild your credit without any worries.

Creditor Assistance Programs

If you do not want to enroll in a consumer credit program, you can help yourself by contacting your creditors yourself, as many offer programs that help customers in need of assistance. Programs vary by creditor and the assistance available can come in the form of lowered interest rates, a reduction in monthly payments or a combination of the two. For large loans, such as a mortgage, a lender may lower your monthly payments or suspend your payments for up to six months. To access these types of programs, call the customer service department, explain your financial situation and need and request enrollment in one of their programs. Lower interest charges and monthly payment can make it easier to pay the amount owed so you can responsible pay your bills and begin to rebuild your credit.