Effective debt management, or managing the debt a consumer currently has more wisely, is an integral part of any good credit repair plan. But getting new credit with a less-than-perfect credit history is difficult, never mind dealing with the much higher interest rates, which makes keeping an already tight budget in line just that much harder. No matter how badly a consumer’s credit score is, meeting all the necessary repayment obligations is vital to moving those scores in a positive direction, and the fundamental element to any long-term credit repair strategy being effective.
Payments – on Time, and in Full
Common sense dictates that a diligent debt repayment objective is crucial, and this will, over time, have a remarkable effect on a consumer’s FICO scores. The FICO scoring model is the benchmark of a lender’s evaluation of credit risk. Timely payments might not initially appear to have an impact, but after awhile, the effort becomes cumulative, and ultimately positive. Late or missed payments can obviously cause late fees to be assessed and accumulate, which in turn causes over-limit charges, and combine to make timely payment efforts that much harder. The results can avalanche, when a single late payment becomes just the first in a series, and all credit repair efforts begin to slowly, and inevitably, unravel.
Don’t Settle for a Settlement
Another tempting but undesirable tactic in a credit repair plan is to consider the ‘easy fix’ of negotiating settlements with creditors. Many lenders, and collection agencies operating on their behalf, employ the technique of offering the consumer a settlement by taking a partial payment to bring the otherwise delinquent account issue to a close. This ‘charge-off’ activity is at an all-time peak in the lending industry, near 12%. Once again, though it is a tempting way out for the consumer, it is hugely detrimental to the credit score improvement strategy. Instead, negotiate smaller payments, but agree to pay the entire debt, and the result will be an improved credit score, and not just another bad credit mark on a credit report.