How to Navigate through 4 of the Trickiest Credit Situations

Disclaimer: This post is sponsored by Lexington Law.

Establishing an excellent credit history isn’t easy, and there may be some snags along the way. That’s especially the case if you’ve made some mistakes or your credit is suffering due to something outside of your control.

Lexington Law can help you in situations where negative items on your credit report are inaccurate, unverified or unfair. They can intervene on your behalf with the credit bureaus and your creditors, and use your legal rights to help you get your credit back in shape.

Here are some of the trickiest situations and what you can do to get through them, either on your own or with help.

1. Your Account Went Into Collections

If you have one or more bills that have gone unpaid, your creditor may send you late notices for about six months before giving up. At that point, your account goes into collections, and you’ll start receiving calls from a debt collector.

At this point, the first thing on your to-do list is to learn about your rights. Under the Fair Debt Collection Practices Act, debt collectors aren’t allowed to do certain things, such as:

  • Call you at inconvenient times and places
  • Tell family members or friends about your debt
  • Threaten you with jail time or violence
  • Misrepresent how much you owe or whether your debt is past the statute of limitations

If a debt collector violates any of these rules, contact your state’s attorney general and file a complaint with the Consumer Financial Protection Bureau.

Also, ask for a debt validation letter, which includes the name of the creditor, how much you owe and statements about your right to verify and dispute the debt.

If you find that the debt isn’t yours or you’ve already paid it off, file a dispute. Be sure to include evidence using your own records of the debt payoff, or a copy of your credit report showing the debt doesn’t belong to you.

If the account is yours, however, set up an agreement with the debt collector in writing to pay off your account. That said, avoid giving the collector access to your checking account through your debit card number or bank information to set up automatic payments. Instead, consider sending money orders or cashier’s checks.

2. You Have a History of Getting Turned Down by Lenders

Whether or not you’ve made some missteps in the past, getting rejected by a lender or credit card company can feel like a personal jab.

If a creditor denies your application due to something credit-related, it’s required by law to send you what’s called an adverse action notice, which explains why you were denied.

While you’re waiting for this notice — it can take up to 30 days to get it — get a copy of your credit report for free at annualcreditreport.com and check your credit score.

With your score and report in hand, take a look to see if there’s anything amiss that you can address immediately. If there’s an error, for instance, take steps to dispute it with the credit bureaus.

If you have some late payments, get caught up, so they don’t damage your score further. Also, work on paying down high card balances.

In other words, there’s no one solution to this problem for everyone. Get as much information on your situation as you can and address the issues you find as soon as possible. Over time, your score and odds of getting approved for a loan or credit card will improve.

3. You’re Establishing Credit for the First Time

Building credit for the first time can feel like a catch-22 situation. You can’t establish it without a credit account, but it’s tough to get an account without any history.

If you’re a college student, you might have success getting approved for a student credit card. Card issuers understand that students are new to the credit scene, so their requirements are relaxed a bit.

If you’re not a student or you’re having a hard time getting a student credit card, consider a secured card. These cards are less than ideal because they require an upfront security deposit, which is typically equal to your credit line.

But if you use the card responsibly over time, which includes keeping your balance low and paying off your balance on time and in full each month, you can increase your credit score to the point where you can close the account and apply for an unsecured card.

Over time, you’ll also be able to apply for other types of credit, such as auto loans, mortgages and personal loans, which can also help you establish a solid history.

4. You’ve Filed Bankruptcy

If you’ve gotten to the point where you can no longer fend off creditors or manage your debt load, bankruptcy is a viable solution. If you haven’t filed yet, work with a bankruptcy attorney to determine how you should proceed.

Once you’ve filed, do everything required of you to discharge your bankruptcy. Depending on the type of bankruptcy and your plan, this process may take years. So stay focused on your goal.

Once the court has discharged your bankruptcy, it may take a while to recover. Your bankruptcy can stay on your credit report for up to 10 years. At this point, you may not qualify for most loans and credit cards, so start with a secured card and work to establish a positive payment history again.

What to Do if it’s All Too Much

Depending on your situation, you may have no difficulty navigating these tricky credit situations on your own. But if you’re feeling overwhelmed or things are getting too complicated, Lexington Law makes sure you don’t have to do it on your own.

Whether you choose to approach these difficult situations on your own or with the help of Lexington Law, do your due diligence and focus on your goal of building credit. It can take time and effort, but the results are well worth it.

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