10 Ways to Improve Your Credit Score

For most people, bankruptcy does not offer an easy way out of their financial responsibilities or offer a quick fix. Instead, you're setting yourself up for long-term financial difficulties, because obtaining any type of credit or loans in the future will be significantly more difficult. Many mortgage brokers (and lenders) and car loan financing companies will automatically reject applicants with bankruptcies listed on their credit reports.

If you do file for bankruptcy, the best thing you can do is slowly rebuild your credit by paying all of your bills on time from that point forward, with no exceptions. Rebuilding your credit in this situation will mostly likely take years, with no quick fixes available.

Strategy 9: Avoid Consolidating Balances onto One Credit Card. Unless you can save a fortune in interest charges by consolidating balances onto one credit card, this strategy should be avoided. One reason to avoid this is that maxing out your credit card will detract from your credit score, even if you make on-time payments. Assuming the interest rate calculations make sense, you're better off distributing your debt over several low-interest credit cards. An alternative is to pay off high-interest credit card balances using another type of debt consolidation loan or by refinancing your mortgage with a cash-out option.

Strategy 10: Negotiate with Your Creditors. Contrary to popular belief, your creditors aren't your enemies (at least they don't have to be). Your creditors are in business. The nature of business dictates that they earn a profit. When you don't pay your bills, that impacts a creditor's ability to do business and impacts its bottom line. Many creditors are willing to be understanding of difficult financial situations and short-term financial problems, especially if you openly communicate with them in a timely manner.

In other words, instead of skipping a handful of payments or defaulting on a loan, contact the creditor as soon as a problem arises and negotiate some form of resolution that's acceptable and within your financial means. Forcing a creditor to turn your debt over to a collection agency will simply cause you bigger problems in the future because many collection agencies are relentless when it comes to recovering money. Furthermore, the negative information that's placed on your credit report will have a long-term negative impact on your credit score.

Depending on the level of your financial difficulties, your creditors may be willing to do one or more of the following things to assist you, assuming you make the effort and show good faith in contacting them to discuss your situation:

• Reduce your interest rate.
• Reduce your monthly minimum payment.
• Waive extra finance charges and late fees.
• Allow you to skip one or more monthly payments (and extend the length of the loan).
• Close the account and allow you to make affordable payments to slowly reduce the outstanding balance over time.
• Close the account and accept a settlement for less than the amount you actually owe.
• Allow you to refinance the loan at a lower interest rate and/or for a longer term to reduce your monthly payments.