You’ve found yourself in financial distress. It’s become harder and harder to maintain those monthly payments. You’re perhaps even falling behind.

You think to yourself, “Well, this is easy. I’ll just cut up all of my credit cards.”

Maybe you’ve gotten a loan from a family member or hit a lottery ticket and decide to just pay things off.

Both of those things may provide you with some emotional relief, but they don’t help to serve an underlying problem: You’ve Messed Up Your Credit.

Here are some simple tips to get started on rebuilding that credit score:

  1. Figure out what your credit score actually is.
    There are numerous sites out there, like Equifax and Experian that will give you a snapshot of how credit lenders (credit cards, auto loan providers, mortgage lenders, etc.) view your trustworthiness.
  2. Make certain your credit score is actually your credit score.
    When you start digging through the details of the things that are dragging your score down, you may find a mistake. There may be a loan you’ve long ago settled that’s still lingering out there. You may have a credit card that’s been the victim of identity theft. Perhaps you’re getting dinged for a child or ex-spouse’s debt obligation. It’s worth a look.
  3. Pay on time.
    Have you ever noticed that every time you get close to the limit on a credit card, the company offers to give you MORE credit? It turns into a vicious circle, and you find yourself never really getting ahead. More important than the amount you pay – or the amount you owe – financial institutions want to see a record of consistency. Sure, you have a lot of debt, but you make faithful payments each and every month. This goes for everything from car loans, credit cards, and mortgages, to your utilities.
  4. Live on an Island.
    When you were younger, you likely lived a much more cash-heavy existence. At payday, you set aside $xx for gas, $xx for school, and $xx for fun. Look at your credit the same way. Give each of your debts a specific role. Your mortgage will always be your mortgage, but assign one credit card to paying for groceries. Assign one for gas and auto repairs. Have one for the fun you can still afford.
    Every time you apply for credit, be it a loan or a store account, it’s considered a “hard inquiry.” When lending institutions see these starting to pile up, they begin to wonder what you need with all of this credit. Perhaps it’s a sign of distress? Much like cutting up your cards won’t fix your bigger problem, acquiring too many will likely put you deeper in a hole.

About #5:  Many who are trying to get a grip on their finances turn to a company like Equifax to track their credit. Under the Fair Credit Reporting Act, they and other institutions are allowed to include your name on lists that credit and insurance companies then use to send you offers of new credit. They’re tempting, sure, but open a can of worms. You can visit or call 1-888-5OPTOUT (1-888-567-8688) to learn more about how this works and how you can stop those solicitations.

Rebuilding your credit score won’t happen overnight. But know where you stand, be faithful in your payments, and be smart with how you spend.

The light in your tunnel is just ahead.