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  • Managing your debt and repairing your credit need not be overwhelming tasks; they can be accomplished successfully with a bit of effort and some sound advice. Since it took time for your credit to fall into disrepair, it will take a consistent change in your lifestyle and financial habits to improve your credit.

    Budget

    You must first know exactly what your debts are and what is on your credit report. Make a list of every debt you have, including the original and current balance, minimum payment required and interest rate. Brainstorm ways to maximize your income and pare down your expenses. You'll be amazed where you can cut back painlessly. Take this information and make a budget with financial tools from DaveRamsey.com.

    Debt Snowball

    Dave Ramsey, host of a nationally syndicated radio show teaching sound personal finance, shows consumers how to begin paying off debt by starting with the smallest debt and paying it off first. Then, with the money you've been saving, pay it against the next largest debt, and do the same to each debt thereafter. As each debt is paid off, you'll build momentum, and before you know it, being debt free can become a reality.

    Savings

    Mismanaged bills usually come from unexpected expenditures like car repairs and medical expenses. Build a savings plan into your budget with a separate emergency fund. Use your savings to pay extra on your debts, since it takes more than minimum payments to reduce your balances.

    Credit Report

    If you haven't seen your current credit report, go online to AnnualCreditReport.com. Although there are numerous sources to obtain your credit reports online, this website is the official site where consumers can obtain their free credit report from each of the three nationwide consumer credit reporting agencies: Equifax, Experian and TransUnion. Check for identity theft and inaccuracies. Dispute any errors.

    Negotiate With Creditors

    If you need help managing your debts and repairing your credit, chances are you are paying high interest rates and exorbitant fees on your credit cards. Call your creditors and negotiate with them for a lower interest rate and fee waivers. Make sure they know you are repairing your credit and are serious about paying your debts responsibly.

    Re-Establish Credit

    Apply for one new credit account about once every six months. Start at your local retailer, then work your way up to a nationally recognized major credit card, like American Express. If you can't pay your balance off even one time on any account, cut your cards up immediately and pay them off. Be careful when applying often for credit, as too many credit inquiries will lower your credit score. You could consider applying for a secured credit card at your local bank. Handling this debt responsibly can help build and repair your credit.



    Considerations

    If you simply can't manage your debt on your own, consider a credit counselor, but only use a trusted nonprofit source like Consumer Credit Counseling Service. To make sure your credit card payments are made on time, sign up for automatic payment deduction. Late credit card fees and high interest payments can capitalize, and you could owe more than your original principal balance. Use a debit card and cut up all of your credit cards. You do not need to have a credit card, and disciplining yourself to stop using one can help you repair your credit. At all costs, avoid debt consolidation loans and filing bankruptcy.

    Source:

    FTC.gov: Credit Repair Tips -- How to Help Yourself

    FTC.gov: Fair Credit Reporting Act -- Know the Law

    Resource:

    DaveRamsey.com: Budgeting Tools

    AnnualCreditReport.com: Free Annual Credit Reports

    CCCusa.org: Consumer Credit Counseling Service

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