How to Repair Debt & Bad Credit

Eager to keep up with the neighbors, you overspent. Perhaps you are faced with immense medical bills or a layoff. Getting your act together starts today and has an impact on tomorrow. You and your spouse may wonder if trying to repair financial woes can really make a difference at this point; it can. Every beneficial step you take with your finances shows up on your credit report. Following a few simple tips can get your family in better financial shape.

Instructions

1

Begin what Dave Ramsey coined "the snowball." A snowball means you repay your smallest debt and put what you would have paid toward your next smallest debt until that one is paid. Make your other minimum payments on time and use any extra money on the smallest debt you have.

2

Pay student loans on time. Important marks go against your credit record if you default. One positive thing about student loans is that the interest rate is typically low.

3

Eliminate the problems that got you into this mess as quickly as possible. Take out health insurance if your problem was unreasonably large medical bills; perhaps sign up for Medicaid if you qualify or a discount plan. Starting an emergency fund that can help you survive for three months without an income is also important.

4

Take out a secured credit card to build credit. Secured credit card companies let you take out a small bit of credit that equals your security deposit. They have small risk because companies don't let you take out more than you can pay.

5

Ask a close relative such as a parent or spouse if you can be added to their oldest credit card account. If they seem unsure, make clear that you do not even need to own the card and that it can be in their possession. Let them know exactly what you are trying to accomplish, which is building credit through their on time payments.