The Better Credit Blog

If you have read my previous articles, you might be saying to yourself, “Ok Ryan, you are giving me all this advice on how to fix my credit score and negotiate with the credit bureaus –are you assuming that I have the money to negotiate with? How do I pay off my bills?” This question is broad and, of course, specific to your individual life situation. Nonetheless, I can tell you with close to absolute certainty that in most cases individuals tend to label ‘paying off bills’ wretchedly more difficult than it can actually be.

Have you ever asked a friend that question? “Bob, how do you suppose I ought to go about paying off all of these suffocating bills?” Likely he would give you a little demeaning grin and respond with something like, “Self-discipline, my friend, you need to get your priorities straight. Hell, get another job!” Perhaps Bob is right, but Bob is too general in his evaluation. In a more specific tone I will tell you the same thing. The key to paying off bills (without having to get another job) is, of course, to change the method in which you spend money during an average day. Average day spending is where most of your money goes. It’s likely that you don’t realize how much this “little stuff” adds up. I didn’t until I started tracking it. If you want to pay off your bills, here is what you gotta do:

1. Use personal finance software, such as Quicken, to track your purchases. I started by using Quicken to enter everything I bought. If I went to 7-11 and bought a bag of chips and a drink, I’d keep the receipt and at the end of the day enter it in. The power of software such as Quicken is that they allow you to ‘categorize’your purchases. Therefore, at any given time, I can see how much money I am spending on any particular item; food, gas, magazine subscriptions, etc. After a short amount of time, you will begin to see your spending trends.
2. Create a rough budget in order to have some sort of spending ceiling. You don’t have to change your spending too much yet. Personal finance software make this really easy. I created a budget by noting all of my reoccurring bills (phone, internet, electric) and then estimating how much I spend on “variables” such as food, gas, and entertainment.
3. Stick with this budget for a couple of months and you will naturally begin to better monitor your spending.
4. Look over the spending categories in your personal finance software and find ways to reduce your overall spending in that particular category. The key is reducing your spending for a particular category. For example, if upon evaluating your spending, you see that you spend $500 per month on food –begin researching ways to reduce this. More than likely you can easily reduce that to $350 - $400 (this is an example of course.)
5. Implement a new budget based on what measures you have taken to reduce a particular category’s expense.

Hopefully you are beginning to see how well this can work. It works well because humans are exceptional experts at grouping things. If you were to simply go about reducing your spending by, for example, telling yourself, “Ok, I will no longer drink a cup of Starbucks coffee every morning”, you would soon feel as though you are missing out of something you once had. When you begin to feel this way, you become discouraged and give up. In contrast, when you categorize everyday items that you purchase, you look for ways to rearrange and revaluate their importance.

The above methods are extremely powerful –it will blow your mind. Tracking your spending through the use of categories can save you hundreds a month and you’ll likely find yourself wanting to live frugally.

‘Frugal Living’ Resources

Once you have identified categories that you can potentially save money on, the next step is to get online and find ways to reduce that category’s budget. We will use the food example I explored earlier because everyone buys food (and everyone can save a ton of cash on it too). There are a bunch of blogs that offer advice on how to save money on food (and everything else for that matter). My favorite frugal living blog is Get Rich Slowly. Surf through their forums and see how other people save money on food. It is particularly interesting (and helpful) to see how much other people with similar family sizes spend on food as well.

Now you can pay off debt and bills

If you follow the steps I outlined above, most likely you’ll find yourself with a couple extra hundred bucks a month. Use this money to pay down debts, negotiate with creditors, or pay off bills. If you are committed and willing to allocate a few moments a day to recording your purchases, you will acquire a newfound appreciation for money and you will also develop positive financial habits that will bring you wealth and happiness for years to come.

Take home points:

1. Purchase personal finance software and track your purchases.
2. Create a budget and group purchases into categories
3. Evaluate your overall spending in particular categories
4. Go online and look for ways to rearrange and revaluate purchases within a category to save money.
5. Use the extra money each month to pay whatever it is that needs to be paid so you can improve your credit.

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During the past week I have written an array of articles that outline the mistakes I made when I first began the process of fixing my bad credit. Scattered throughout these articles, readers will find some of the most valuable information that can be obtained when taking on the task of fixing bad credit. However, I have yet condensed this information into a simple list. Countless emails have found their way into my inbox this week from readers expressing their disappointment that they didn’t come across this information earlier.

If you have paid any attention at all to the recent economic problems being absorbed by Wall Street due to this country’s credit problem, you understand how many people sincerely have credit problems that are crippling their lives in almost every way.

My goal, of course, is to reach as many people as I can. Therefore, I have compiled the following list of tips to fix bad credit for people that may not have time to read all of my in-depth articles. Some of this information is extended in more depth in previous articles, and some of this information I will write about in future articles. I encourage you to scan over each tip, and when you have time, read the full article pertaining to that particular tip.

The 10 Surefire Tips for Fixing Bad Credit

1. Get a copy for your credit report before contacting a debt collector. You need to know exactly how much you owe –don’t rely on a collection letter.

2. Never negotiate a debt over the phone. Always negotiate via certified mail. A paper trail provides you legal protections.

3. Negotiate for negative records to be completely removed from your credit report.

4. When you are ready to pay off a debt, attempt to contact the original creditor before dealing with a collection agency.

5. Dispute inaccurate information on your credit report. This includes inaccurate personal information such as address and employment information.

6. Have at least three lines of credit in good standing for a minimum of two years. Preferable this would be two credit cards and one installment loan. Get a credit card for people with bad credit here

7. Pay down any student loans 70% if possible. A large amount of student loan debt can weigh heavily on your credit.

8. Pay down credit cards and maintain a 20/80 debt-to-credit ratio.

9. Do not close credit card accounts that are in good standing. Keep them open even if you don’t use them. Read my article on this.

10. Be patient and remember it takes much less time to screw up your credit than to fix it. The process of fixing bad credit may take you a few years, but if you are persistent, you will find it’s much easier and rewarding than you may think.

Independent Thought

Before giving a yes to a loan calculate the payments using a loan calculator that will make you aware exactly how much you have to pay for how long. Google lender loans for vast results of lenders. The bank loan market will grow as interest rates have been cut in December, 2007. If your business is in dire need of a business loan and you have bad credit history you may want to check out financial institutions that offer a bad credit loan. Consider a credit union loan, which is on easier terms than most bank loans.