Posts Tagged ‘bad credit’

How To Rebuild Your Credit Rating

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If you’ve had trouble paying your bills (who hasn’t, in this terrible economy?) and you have dings on your credit, you may think that it will be impossible to rebuild your credit rating. Nothing could be farther from the truth. Bad marks on your credit lose their impact on your credit score as time passes. Even a bankruptcy will lose much of its impact, although it will still remain on credit report, five years after the fact. Bad marks for late payments lose their impact over a much shorter period of time; perhaps  six months to a year after the fact, assuming you make all other payments on time.

So how do you rebuild your credit rating? The following four actions will help you to improve your credit score over a period of time. 

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A Tale Of Three Families: Do Bad Decisions Lead To Financial Trouble?

A comment left on this entry by About.com’s LaToya Irby got me to thinking about people in financial trouble and how they got there, leaving aside for the moment the catastrophic economy that we’re in today.

In the best of all worlds, no one would ever spend more than they can afford and everyone would be debt free. However, we know that the world is far from perfect and people often make financial decisions based on emotion and necessity.

Consider a young couple with a child living on minimum wage. The husband works two jobs and the wife works one, and together they earn enough money to live with a little extra to spare. They decide to use that little extra bit they’re able to pull in to save towards buying their child an Xbox 360 as a Christmas present. December rolls around and they have the money saved up when disaster strikes. The wife breaks her leg and is out of work for six to eight weeks. Their Xbox 360 fund suddenly becomes a lifeline, but Christmas is still coming and they still want to see their child’s face light up when he opens up his gifts to see that he has a new Xbox 360. The family buys the Xbox on a store credit card.

Then there’s the solidly middle class two earner family. Both parents work in good paying jobs and on that income, they’re able to afford a decent house in a nice neighborhood. They run small balances on their credit cards and are paying part of the tuition for one of their children who is in college and braces for their middle child. Everything is fine until the husband gets laid off. Suddenly, the family’s income is cut in half and they dig into their savings to continue to pay the bills that don’t stop coming simply because of a lost job. Time drags on and the husband can’t find work. His industry has gone under, but the bills keep coming. Now this family is relying on their credit cards to make ends meet.

Finally, there’s the family earning six figures. This family is among the affluent and well-to-do. They live in a large house in a gated community and drive expensive cars. Curiously, just like the middle class family and even like the poor family, when one of the breadwinners no longer has a job, what was a rosy financial picture starts looking dingy and grim.  Because this family had been affluent, there is room for cutting back and for making lifestyle changes to adjust for lower income. They sell their expensive cars and buy cheaper ones. They don’t spend as much money as they are used to. However, some of the bills of the affluent lifestyle remain and can’t be gotten rid of. Among these is the house with the now unaffordable mortgage payment. This once affluent family now faces foreclosure.

These stories are purely hypothetical, but hundreds of them play out daily in real life. In the first case, human emotion and the desire to make a child happy result in what to cold hard facts is an irrational financial choice. In the other cases, it is about continuing to pay the bills that continue to come in the mail even when the income to pay them is no longer there.

To suggest that people in financial trouble got there because of poor decision making is too simplistic. It is never that black or white. Emotions and circumstance play a role and one can’t predict what lies beyond the next turn down the road of life.

Can Bad Credit Cost You A Job?

In a recent CNN report, it was revealed that 60% of prospective employers run credit checks on job applicants and 13% do is as a matter of standard operating procedure. 

Increasingly, many employers believe that bad credit correlates to poor character and therefore justify their use of credit checks as a screening tool to help them find the best candidates.They claim that prospective employees with poor credit are more likely to steal or to cause trouble down the line.

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