Step 5: Rebuild Credit and Start Saving

If you cannot pay a bill and are unable to make arrangements with the creditor, it is possible that your credit report and score will suffer. Creditors typically will report delinquencies in excess of 30 days to the credit bureaus. (Utilities and other non-credit bills tend to not get reported until they are sent to a collection agency.) Late payments and most other negative information can stay on your credit report for seven years. Of course, you don't want to have bad credit. No one does, but think about where your credit report fits among all of your other priorities. In other words, given a limited income that does not enable you to pay all of your expenses and bills, what is more important: keeping a roof over your head and food in your stomach or having immaculate credit?

Once you have gotten through your financial crisis, you will be in a better position to work on rebuilding your credit. Resume making your payments on time, and keep your balances on revolving debt (e.g. credit cards, lines of credit) low. Time is your friend. Although late payments can stay on your credit report for seven years, the older a delinquent payment is, the less of an effect it has on your credit score, especially if your recent payment history is positive. If all of your accounts were closed, look into opening a new account. With a low credit score, you may need a co-signer to get approved. A secured credit card is another option. Secured credit cards require you to make a deposit, which the creditor gets to keep if you do not make payments, and are usually the easiest type of credit to get.

While we all hope to never encounter financial problems again, the unfortunate truth is that many families face hardships multiple times in the course of their lives. However, even though many problems cannot be prevented, you can at least prepare for them. One of the best ways to prepare for a financial crisis is to have emergency savings – most financial experts recommend that you set aside at least three to six months worth of essential living expenses. If your account is currently running on empty, saving that amount of money may seem like an impossible task, but it is not. Once your financial situation stabilizes, start setting aside whatever you can, be it $30 a month or $100. Make it an automatic process by having some of your paycheck directly deposited into your savings account or setting up a weekly or monthly automatic transfer from your checking account to your savings account. Pretty soon, you will find yourself with a tidy sum, and if another financial storm comes your way, you’ll be covered.

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