Get rid of bad credit

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How to Get Rid of Bad Credit

More families and individuals are suffering from the stigma of bad credit than ever before. Overextended on credit cards, mortgage payments climbing, fuel and food prices spiraling upward, are all contributing to a bad credit nightmare. But there is hope.

Once you've been branded a bad credit risk, getting rid of that reputation can be a challenge and take time. Here are a few tips.

First, call your credit card companies and try to get your card payments reduced, your interest rate lowered, or otherwise get some kind of payment breather. This can help you direct cash toward other expenses like food and gas for the car.

Next, Cancel or close as many cards as you can. Having fewer cards helps build your credit score. And lower balances - not being maxed out on any card - also helps improve your credit score. By getting some concession from your credit card company, you'll have extras cash to put toward the principal each month instead of just making the minimum payment.

Third, try not to take the step of borrowing more money to pay off cards. This usually backfires, as the borrower pays off balances, leaves the card active, and continues to charge on the card that was supposed to be closed. Unless you are getting a good low interest deal, don't take this step unless you are committed to closing the credit card account immediately when you pay it off. You can also close an account that still has a balance; some card companies will then close the card automatically once the balance reaches zero.

Fourth, find a way to pay more than the minimum each month. List your credit cards and other debts in order of highest interest rate to lowest. Starting with the first card, figure out how much extra you can pay toward debt each month. For example if you're willing to skip daily gourmet coffee drink, you can put the extra $25 a week toward your most pressing credit card account. This helps reduce the principal balance, reduces your interest, and gets the card paid off faster. In turn, your credit score starts to improve as well.

Last, don't take out any more credit cards! If your credit is so bad that you can't get approved, look on this as a blessing in disguise, because it will force you to live with the cash you bring home each month. Once your credit cards are paid off, and having learned to live on what you earn, your income will be all your own to invest and grow wealth for yourself and your family. Look forward to the day in the future when your payment plan will make that happen.