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Ghosts of the past: How to avoid being haunted by bad credit

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Do you have debts that never seem to die, bankruptcy or evictions that haunt you years later or even tax liens that keep you from making smart investments? Even if you have money in your pocket, a bad credit score can go a long way in ruining your financial prospects.

Not everyone has good credit, and some people might not even know their credit score. Still, everyone usually wants better credit, and there are certain ways to do that. But what if you already had some trouble with debts, loans or even judgments? Plenty of people are haunted by old debts for years to come, but here’s how you can conquer the ghosts of past lenders to live without fear.

1. Look for a human face under the sheet

Whether you believe in ghosts or not, you probably know that debt collectors aren’t the root of all evil. If you stop and think about it, they’re just people doing their jobs, but they’re still human. Your ghosts might not be as unreasonable as you think, so try negotiating payment plans that work for you both. In the end, your lenders just want to get paid, even if that might mean a lesser amount paid in a lump sum. Be sure to record any negotiations officially to avoid misunderstandings of the terms.

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2. Learn from your weaknesses

In most cases, having bad credit isn’t pleasant. But there is an upside, in that most people trying to improve their credit learn to be more financially responsible. Despite soul-crushing debt or the constant stress of creditor calls, you can find a silver lining from financial troubles. Once you start to take responsibility and fix the problem rather than running away from it, you can breathe easier and feel in control of your fate.

Check your credit score, and don’t ignore the phone calls and final notices from collections agencies. You can overcome this, but you have to believe it’s possible, and you have to get help. So take a deep breath, assess the damage and resolve to learn from your mistakes for a better financial future.

3. Defend yourself when necessary

The ghosts of your debts and creditors may seem invincible, but you have rights too. If you find that the constant contact from collection agencies makes your life hellish, you can send a “cease contact letter,” which only allows contact to notify you of any legal action being taken.

Or, if you feel a debt is being exaggerated, you can dispute it and request verification. Don’t let yourself get pushed around, but be professional throughout the process.

Last of all, certain debts have a statute of limitations, so if it’s old enough, it might be worth trying to get it expunged.

4. Keep your cards in order

If you feel like credit cards are a problem, don’t use any. There are other ways to gain and build credit, especially if you have had major credit card debt in the past. Look into opening a line of credit with your bank, or get credit for paying rent on time. Asking a trusted friend to co-sign with you can also help to improve your credit.

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5. Trust in time

After a devastating financial event, it can be hard to recover completely. For many outstanding debts, your credit score will likely be dismal for some time. Bankruptcy and other issues may affect your credit score anywhere from seven to 10 years. The most important thing is to be patient, and keep your nose clean moving forward.

Yes, there still might be outstanding debt or negative information being reported about you, but the best you can do is to pay your bills on time and don’t spend more than you make. Eventually, you credit score will recover and you’ll have more freedom to invest and purchase in the future.