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Millions of consumers have missed payments on loans and their credit rating has taken a deep dive. The feeling is all-too-often overwhelming. Where do you start to try and rehabilitate a poor credit rating?

Each credit situation is different. However, there are some general guidelines to follow.

First, how much debt is currently past due?  Look at the balances, not just the payments. You want to total the balances on all the past due accounts so you have a better idea the amount to pay in order to bring your accounts current. You want to look at any debt, past due utility payments or medical expenditures.

Second, How much extra money each month do you have to pay towards this debt? Is it $50 or $200. You want to be conservative too. Too often, consumers think they have $350 extra each month to pay off debt. After a few unexpected expenses arise, it ends up being $150 and the plan is blown up. Give yourself a little room and then if you have extra, you can apply it to the debt at that time. It is easier to exceed e4xpectations than to come short of expectations.

Third, how long will it take you to pay off the past due debt and bring everything current? If you have $3,000 in past due debt and can pay $200 a month towards that debt, it will take you 15 months to bring things current. If it is going to take you longer than 36 months, or three years, it might be better to look at a debt management program either through a consumer credit counseling service (such as Family Financial), or a Chapter 13 bankruptcy. If repayment of debt is going to take you several more years, a Chapter 7 bankruptcy might be an option to get you back on your feet.

Once you have a plan, start with the small debt. It is best to take out the low hanging fruit as fast as you can so as to get to the next step. Your credit score will improve faster. Also, be discipline in your approach by making sure not to deviate too much from your plan. Don’t take on new expenditures unless you absolutely have to. Finally, create an account to put some money in for those unexpected expenses. This way, you can keep to your plan and meet many of the surprises that can come along with life.

Once you are well on your way to resolve your debt issues, your credit score will improve and there will be a great feeling of financial relief. Following a viable plan is a great step to your financial freedom.

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