Credit Report / Credit Score

I’m a Busy Lawyer With Horrible Credit From a Divorce

Written by Steve Rhode

Question:

Dear Steve,

Largely former spouse debt. I have resolved/settled some, but 1/2 dozen accounts dragging credit down into 500’s.

Time is a problem for me – have a busy law practice. Could use help to address negatives, and to advise what to pay, when.

Greg

Answer:

Dear Greg,

Well, the good news is you’ve got nowhere to go but up.

I think I can make this pretty simple and easy for you. This simple trick is one that absolutely works.

Getting great credit back is not hard, but there are no good shortcuts and the process isn’t sexy.

If you want to avoid a distraction on getting your credit back into shape then I’d skip all the hype and gimmicks people often try to sell.

Rebuilding great credit requires three basic components.

Take Care of Old Debts

You can certainly settle or satisfy old lingering debts. How you do it is up to you. I’d do whatever is simplest and easiest for you to do to make it happen.

Either way, you will be left with a negative history of the account performance before it was resolved. The difference is if you settle debts and you are not insolvent you can wind up with an unexpected tax bill over forgiven debt.

If you have a certain amount of money to use each month towards the old debts I’d suggest starting with the smallest balances first and knock out as many as you can with the available funds. The more you can close the door on, the better.

Current Credit Not Maxed Out

Stay in the credit game. Far too many people start avoiding credit or use a debit card after credit trauma. That is the opposite of what needs to happen to rebuild great credit.

Instead, keep your credit cards below 33% of the credit limit. But most importantly, pay the bills on time. In fact, pay them early.

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If you want to make this a really easy solution you can make sure you enroll your bills into an autopay solution where the minimum payment will be made in case you get distracted. But always strive to pay revolving accounts off in full each month.

Oh, and don’t close your oldest credit card accounts. That history of a long relationship will help you, eventually.

Time

The more time that passes from your delinquent accounts, the more your score will improve. A year of good payments and no delinquent accounts will make a world of difference.

It Works

I got a call just yesterday from a friend that had tried all sorts of tricks to improve his credit. I advised him early on it was going to be a waste of time and energy. He didn’t listen. I knew he’d be back.

A year ago he called me to say his score was not going up from the 558 it was at even though he had been trying. I told him to stop the nonsense and wasted time looking for a fast solution. He finally gave up and followed my advice above.

The reason my friend called me yesterday was to say his credit score was now 700 and he was just approved for a new mortgage.

Bonus Tip

I recommend enrolling in some solution that will allow you to track your credit score and progress. CreditKarma.com offers a free solution that monitors two out of three credit bureau reports. Keep in mind the goal of CreditKarmais to try to sell you new credit products. That’s why they do it.

If you want to dispute old negative items on your credit report and see if they will get removed, you can certainly do that. However, if they reported again in the future on a data dump by the creditor, don’t get upset. It happens and if the creditor is reporting the history again you can dispute it again, accept it if it is accurate, and then just ignore it and get back to work.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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