How do you know if you can still do credit history repair?

The way people usually play the credit game is that they get credit cards as a young adults, they max them out, they get more cards, they borrow on one to pay the minimum payments on the others and finally they can’t make the payments anymore.

Even if you’ve passed that point, you still have options. The major credit history repair options are bankruptcy, debt settlement, debt consolidation, credit counseling or simply changing your spending habits.

People often worry how making any changes will affect their credit. The more important issue is the mountain of debt that’s eating your financial future. With too much debt, you won’t be able to get any more credit anyway. Plus it’s disrupting your cash flow.

The most dramatic and final option is bankruptcy. This is good for people who have only a few assets and much more debt than they could ever pay back. It does cost something to get going and will impact your credit more than anything else.

Debt settlement is a great option if you just want to get out of debt and don’t mind temporary bad credit. Instead of paying your monthly payments, you put all that money in a savings account and once your accounts charge off, you negotiate 20-40% settlements with the creditors. If you do this, be sure to get it in writing that the account is settled. Be sure and know the laws in your state because in some jurisdictions, creditors can garnish wages.

Debt consolidation means you get one big loan and use it to pay off your other loans. You’ll want to make sure to avoid the trap of using those paid accounts again and getting back into debt. Additionally, people often do this with a home equity loan which could put your home in jeopardy if you can’t make the payments later on.

Please don’t even attempt credit counseling. If you follow the money, they’re working for the creditors. They get a cut if they set you up with a lower rate from a creditor. That’s why most of them don’t work with all creditors. You can lower your own interest rate if that’s all you need. And for that service, they’ll put a third party intervention mark on your credit which is not a good thing.

The best option is to manage your money better. Obviously if you’re already too far behind, you need to do something more than just pay down your debt. If you can pay down your debt, pay the highest rates first. Negotiate your rates down and make your creditors bid against each other for your business. Once you pay off one, apply that payment to another. Keep that up until you’re where you want to be.

While your current situation may look dismal, there are always options. Figure out what you really want to accomplish and get started.