Credit Problems

Sometimes, because of sickness, job loss or other reasons, people become overwhelmed by bills. This is not the time to ignore the problem and hope it goes away. First, contact creditors in writing and advise them of your situation. While they are not obligated to give you extra time to pay your bills, they may be willing to consider alternative payment plans. Then assess your options:

Credit counseling service—These organizations are beneficial if you need help getting your finances in order, setting up a budget, or arranging to pay accounts. They are often available at low cost. Contact DFI to see if the organization is properly licensed in Wisconsin.

Bankruptcy—This should only be considered after consulting with an attorney, as this will appear on your credit report for 10 years. There are two basic types of bankruptcy: Chapter 13 and Chapter 7. Chapter 13 allows a debtor to pay off creditors over 3-5 years. In this case debtors won’t lose any property or possessions. Chapter 7 involves the liquidation of all your assets, except those exempt by law, to pay your debts.

Although bankruptcy will clear most of your debts, it may not eliminate spousal and child support payments, some student loans, taxes or fines.

Credit Counseling Services

Re-establishing Credit

Re-establishing a good credit rating is not easy, but with hard work and perseverance it can be done. The best way to start is to establish a checking and savings account with your local financial institution. Often a smaller community bank, savings and loan or credit union will be more able to help you because their lending policies may be more flexible. Make sure to regularly deposit money into both accounts and never overdraw on either. Build a good relationship and a solid account history with them. You can then sit down with them and discuss your situation. Be honest regarding your past, but also highlight the effort you have put forth on your accounts with them. They may be willing to grant you a loan. You have then taken the first step to regaining good credit.

Although this method takes time, it is the best way for people to rebuild damaged credit. There is no quick way to fix credit, so be careful about responding to organizations who claim to be able to fix your credit overnight, or ask you to pay a fee for assisting you in obtaining credit. It doesn’t work that way.