Running into credit problems is one of the most frustrating things that can happen to a person. Not only do you owe a lot of money to your credit card companies, but you must also consider the implications on your credit rating. Even if you're able to work yourself out of your hole, it can take years to undo your missteps.
Credit Problems
When money becomes tight and you have to rely more on your credit cards, your credit is affected in many ways. If you exceed your credit limit, your credit report shows it. Your report also shows that your debt level is increasing, which will diminish your credit score. Lastly, if your payments on your credit cards fall more than 30 days past due, this is reported to the credit bureaus.
Long-term Effects
Unfortunately, this negative information can have long-lasting effects. Most negative data stays on your credit file for seven years. While more recent information takes precedence over older data, the fact remains that your score will be impacted for years to come. You can expect to pay a higher interest rate on a car loan or any other form of credit, and you may even find that you're unable to get an apartment or job because of a bad credit score.
Getting Back on Track
Many companies claim that they can magically fix your credit. However, this is just not possible. The only way to get yourself back on track is to avoid the negative information that can destroy your credit. By paying your bills on time, not relying excessively on your cards and staying within your credit limits, you will begin to build a credit profile that can improve your credit score. Over time, this positive data will outweigh the negative information, but it won't happen right away.
Outside Help
If you find that you're unable to get your credit situation under control, you have options. One is to join a debt management program, which can reduce or eliminate your interest rates, thereby allowing you to pay down your bills faster. Another option is a debt settlement, in which you settle with the credit card company for less than you owe. In both cases, you may experience a negative impact on your credit in the short term, but as your debts are paid off your credit score will gradually improve.
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