Bad Credit Boot Camp

An OppLoans Guide to Understanding Your Credit, Credit Report, and Credit Score.

Talk to a credit counselor

At a certain point, you may find yourself in a financial situation that’s too complex and messy for you to handle on your own. If this happens, don’t lose hope. Credit counselors can be a cost-effective solution to help you manage your debt and start working towards a better credit score and a more stable financial future. The National Foundation for Credit Counseling and Financial Counseling Association of America are two trustworthy organizations that can provide high-quality financial assistance either for free or at very affordable prices.27

Credit counseling offers more than just budgeting and financial advice. Counselors can help you negotiate a payment plan with your credit card company that will make paying back your balance more manageable.  Your payments on these new plans will be reported to all three credit bureaus and can help move your credit score up in the right direction.

In some cases, credit counselors may recommend taking out a debt consolidation loan to save money on interest. Let’s say you have $1,000 in debt spread across four different accounts with varying interest rates. If you take out a $1,000 loan to pay off that debt from a lender that offers a lower overall interest rate, you can pay one bill every month instead of four, and save on interest in the long run.28 Keep in mind that this is not a good option for everyone – talk to your credit counselor before taking out any more loans.

“If creditors are unwilling to work with a consumer to set up a repayment plan, then they should contact a certified credit counseling agency to ask for help. The agency may be able to help them enroll in a debt management program. It’s basically a consolidated debt repayment plan that covers all of the person’s accounts. Working with credit counselors often delivers better results, because they have established relationships with creditors and a proven record of helping consumers get out of debt. As such, creditors are often more willing to negotiate to reduce or eliminate interest charges and agree to an adjusted payment schedule.

When executed correctly, a debt management program should not have any negative effect on the consumer’s credit. In fact, it helps them eliminate their balances, which fixes their credit utilization ratio. At the same time, since creditors agree to accept lower payments, it also helps build positive payment history. Once a consumer completes the program, they can take other steps to improve their credit, such as gradually taking on new debt and making on-time payments while maintaining low balances.”

-Director of Education and Communication for April Lewis-Parks

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