2-8-06

Poor credit is running rampant throughout the country, especially where I live.

Every day, I get people in wanting to borrow money and their credit is challenged, to put it nicely.

I see a lot of bankrupty, charge offs, medical collections, repossessions and foreclosures.

Then people come in and want to borrow more money.

I'm not all that hard on people who have medical collections as there isn't a lot of people can do about that. A lot of the medical collection agencies will try to get a collection started almost before the bill is sent.

But the other problems aren't as easily forgiving. A lot of people have bad credit from past divorces, relationships, loss of jobs or some other reason that I have heard thousands of times.

Lately, a lot of people have blamed their credit problems or slow pays on the price of gas.

Uh, that's not a very good reason.

So if you have bad credit and won't to make it better, try these easy steps.

1. Start paying your bills on time. Nothing looks worse on your credit than seeing that you currently have past-due loans.

2. Get a current credit report. Sometimes, the poor credit might be wrong and you need to get this fixed. Also, you might see something negative on your credit report that you might have forgotten. If this is the case, start paying on it or pay it off. A paid collection looks a lot better than a simple collection that sits around doing nothing but collecting interest.

3. Change your paying habits. There are a lot of people who wait to the last minute to try and pay a bill and frequently, there might not be any money left to make the payment.

4. Pay your bills as soon as you get paid. This goes back to number four. The people with good credit usually make their payments as soon as they are paid, even if the payment isn't due for another week or two.

5. If you have something on your credit that you can't possibly pay, try to negotiate with the creditor or attorney. You will find that a lot of creditors will be happy to get say 50 cents on the dollar instead of nothing. They might also be willing to take the negative item off your credit report.

If your credit is bad, you will pay more on loans (provided you can get loans). I see people paying 18 percent and higher on loans all the time. Some of them don't know any better. Others don't have any choice because of previous bad credit.

Let's say you're borrowing $5,000 for 60 months. If your credit is bad and you have to pay 18 percent, your payments will be $126.97. Over the life of the loan, that means you pay $7,618,20.

But if your credit is better and you pay around 8 percent, your payment would be $101.38. Over the loan, you would pay $6,082.80. So you are paying $1,535.40.

It gets much worse if you have to borrow more money, of course.

Here is the easiest way that I have found to reestablish your credit with a local bank. You will have to either save up say $2,000. Deposit the money in the bank into a savings account or a CD and then borrow against it.

This is the safest loan a bank can make as the money is just sitting there in case the borrower defaults. You will be borrowing against your own money, which isn't always great, but you should get a better rate and if it is paid off as agreed, this will set a good track record for you with the bank.

You might have to do this a few times, but eventually if you pay as agreed, the bank will start thinking you are a good credit risk and you won't have to pay as high of a rate and you will be more likely to get money when you need it.

Hopefully this has helped.