Grads, Clean Up Your Credit
The long-term fix, on the other hand, is a matter of lifestyle choice and discipline. Kicking bad financial habits can be as tough as dieting or quitting smoking. If you're not too far in debt and most of your problems have to do with paying on time or creeping too close to your credit limit, set up a budget and calendar, and start using automated payments. Give extra care to bills that are due quarterly or semiannually–they're easy to lose track of.
But if your problems run deeper and you're in serious debt because of overspending, then it's time to take a hard look at your lifestyle. "The fact of the matter is there are only two choices. You can spend less or earn more," says Furois. That means cutting down on spending and putting that extra money into paying off debt.
Find advice on credit and debt management from the National Foundation for Credit Counseling, or if you're still in school, see if your college offers counseling services. But be careful. There are plenty of shady counselors ready to rip you off, and the NFCC is where you can find one who has your best interests in mind.
Some tips if you're trying to get your credit under control by yourself:
• Consider which debt to pay off first. If you're trying to be debt free as quickly as possible, pay off the credit line with the highest interest rate first. However, if you're trying to raise your credit score, pay off whichever account is closest to its limit.
• Don't apply for more credit if you don't have to. The more applications for credit, the worse it looks.
• Don't close or consolidate accounts. If you shut down your oldest accounts, it will make your credit history look shorter than it actually is.
• Depending on how bad your credit is, you may have to consider filing for bankruptcy. It will look awful on a credit report, but if your score is trashed anyway, it might be the only way to start anew. Before you can file for bankruptcy, you must go through a government-approved credit counseling program; check the Department of Justice's list of approved services. One word of caution: If a large part of your debt is in the form of federal student loans, you might be out of luck–filing for bankruptcy won't relieve you of the obligation to pay them off.
More about credit:
• Building Good Credit: A Guide for Young People and Parents
• Who Checks Your Credit Report?
• Putting Teens on the Path to Good Credit
• Credit in College: Easy to Get, Easy to Ruin
• Credit Reports and Scores: FAQ
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