Dealing with Bad Credit

Dealing with bad credit can be challenging, but it doesn’t have to mean financial ruin. There are a number of methods to repair your credit including debt consolidation, secured credit cards, and even negotiations with credit card companies. If you're dealing with bad credit, one or more of these solutions can work for you.

Secured credit cards

For those whose bad credit is in the past, obtaining a secured credit card is a simple remedy. If you don't currently have any outstanding debt and merely need to raise your credit score, a secured card will give you a jump start. All you need to open an account is a minimum deposit of $200 to $300 — an amount that usually constitutes the credit limit on your card. To build a strong credit history, just be sure to make your payments on time and you’ll gradually re-establish your credit. Sometimes in as little as six months, secured credit cardholders are eligible for unsecured credit cards.

Working with credit card companies to resolve bad debt

Many credit card companies will negotiate with you in order to resolve an outstanding debt. You can ask them to freeze your account (which means you may no longer charge on that card) and stop charging you compound interest. More often than not, credit card companies are willing to do this, particularly if you are at risk for bankruptcy. You may also be able to strike a deal with them in which you pay only a percentage of your original debt. In either case, you will need to set up a payment schedule that is agreeable to the company and then stick to it no matter what.

Dealing with bad credit on open accounts

If you are dealing with bad credit that is the result of repeated late payments and/or maxed-out cards, you can try to engage in do-it-yourself credit repair. Debt consolidation is always an option; however, it’s best suited to people whose monthly payments are unmanageable. If you can cut unnecessary monthly expenditures and begin paying your creditors on time, you can avoid taking more drastic measures.

Working with a credit counselor

For help with figuring out a workable budget, you may want to consult a credit counselor. There are several non-profit organizations that offer free or low cost credit counseling to people in need. Two good resources are the National Foundation of Credit Counselors (NFCC) and the Independent Association of Credit Counselors (IACC).