How do you know if your credit history is too bad to repair?
The way people ususally play the credit game is that they get credit cards as a young adults, they max them out, they get more cards, they borrow on one to pay the minimum payments on the others and finally they can't make the payments anymore.
Even if you've passed that point, you still have options. The major credit history repair options are bankruptcy, debt settlement, debt consolidation, credit counseling or simply changing your spending habits.
There's always the concern regarding how any particular option will affect your credit. While that's a valid concern, a mountain of debt ruins your credit AND your cash flow. If you don't do something… anything about the actual debt, it won't matter how good your credit is.
Bankruptcy is good for people who have few assets and way more debt than they can pay back. It does cost a little bit of money and it will stay on your credit for up to 10 years.
Debt settlement is a great option if you just want to get out of debt and don't mind temporary bad credit. Instead of paying your monthly payments, you put all that money in a savings account and once your accounts charge off, you negotiate 20-40% settlements with the creditors. If you do this, be sure to get it in writing that the account is settled. Be sure and know the laws in your state because in some jurisdictions, creditors can garnish wages.
Debt consolidation means you get one big loan and use it to pay off your other loans. You'll want to make sure to avoid the trap of using those paid accounts again and getting back into debt. Additionally, people often do this with a home equity loan which could put your home in jeapardy if you can't make the payments later on.
Credit counseling is a complete waste in my opinion. They take a monthly fee from you and negotiate a lower interest rate for you. Then the credit card companies pay them for keeping you making your payments so there's usually a conflict of interest. You can negotiate your own rates and avoid the mark that would go on your credit with a third party intervention.
The last option is to learn to manage your spending better. Negotiate your rates as low as you can. Then pay the minimum on all of your accounts except the one with the highest rate. Once that's paid down, use that as leverage to negotiate better rates still or open a different account with a better rate. Take the money you were using to pay that one and add it to the minimum payment on the next highest rate account. Repeat until you're at a level of debt you're happy with.
No matter how bleak your situation might seem, you always have options. Figure out what your long term goals are and choose the options that get you there.
