First, Stop avoiding your credit report and the total amount of debt you have. “Hoping” financial situations eventually improve on their own is not helpful. There’s no such thing as waiting out bad credit, not even for that cursed 7-year mark for items to fall off of the credit file. There is action you take now to drastically improve your credit score within the next 30 to 90 days. Go ahead and pull your 3 major bureau credit reports free from annualcreditreport.com
Secondly, identify which items are working for, which items are impacting you negatively and which items could potentially work in your favor.
Maxed out credit cards currently hurting your score could help you by paying down those balances. Negative items may potentially be removed from your credit report by disputing them properly. Not by clicking a button on a website to dispute but writing the correct letters to the credit bureaus and following up promptly in 30 days.
Paying down debt will reduce your debt to income ratio. These things will expand your opportunities for home ownership, increase your score and allow you to get better rates on current bills such as life insurance.
*Side note: Seeing items removed from your credit doesn’t necessarily mean you don’t owe the debt, but it does mean that your credit score won’t have to suffer because of it.
Third, create a plan. Establish a budget allocating funds to pay credit cards off and pay down debt. Utilize the debt snowball by vigorously working to pay off one bill. Then add that monthly payment to the monthly payment of the next bill you plan to pay off. Continue this process until you reach debt freedom. This may be the point where you realize It will be impactful to put something up for sale, cut any monthly bills you can cut and pick up some sort of part time business to increase your income.
Fourth, Boost your credit score. Sign up with a report my rent program if you are renting. Or if you don’t have credit, secured credit cards are great start for building credit if you have no credit or a low credit score. Just remember to be committed to discipline and wisdom once that little piece of plastic is in your hand.
Number Five here should probably be number one but prepare yourself mentally. Having a mountain of debt, a low credit score attached to financial aspirations begins with frustration. But you are not in a situation that many people have found themselves out of.
Remember! You’ve Got THIS!