Two of the biggest mistakes that people new to credit repair make are 1) not disputing the items on their credit report to the credit bureau’s first (this is a biggie) and 2) not using Certified Mail, Return Receipt when sending correspondence to anyone related to their credit repair efforts.

If you don’t send the mail via CMRR, you have no way of proving (in court, or to the credit bureau) if and when you sent anything, and if and when the receiver received it. I guess you can just rely on them to tell the truth right? Wrong, don’t count on anyone’s honesty, you will be let down a lot. Cover your butt when it comes to credit repair, don’t give them the chance to take the path of least resistance, because they will, you can be sure of that.

Don’t know how to send a Certified Letter? Go here. 

Don’t know how to send it Return Receipt? Go here.

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Learning how to properly use credit cards is often the difference between someone with good credit and someone with bad credit. Since credit cards are probably the most popular vehicle people use to drive themselves into the depths of credit despair, it is a great idea to set forth rules of engagement when it comes to your credit cards.

Rule one: Don’t purchase consumables with your credit card. Pay cash always.

This is a biggie, buying your morning coffee and bagel with your credit card ensures that you must use your card every single day. You then get into the habit of doing so. Not good. Pay cash like most people do when buying things you eat, drink, or smoke everyday. The credit card should only be used occasionally, any more than that and you wind up paying interest on what? A bagel. You would be the only one at work who pays $8.00 for a buttered bagel. Sounds stupid but it happens.

Rule two: If you don’t have the cash in your bank account to cover a purchase, YOU CAN’T AFFORD IT!

This is another big one. The only exception here is emergencies, and by emergencies I don’t mean that PlayStation 3 just released a collector’s edition of World of Warcraft that comes in a gold plated tin, and you just HAVE to charge it because you don’t get paid until next week. An emergency is having a flat tire on your only car, or the boiler goes kaput. If there weren’t credit cards, you wouldn’t be able to buy something if you didn’t have the money. That is the difference between society before and after consumer plastic. We were able to survive without credit cards for a long time. You should be able to do the same for non-emergency purchases. Don’t make it the norm to live on a borrowed dime, there is no faster way into the poor house.

Rule three: The minimum payment accomplishes NOTHING but putting more money into the pocket of the creditor.

Every time you make the minimum payment, the majority of your payment is likely to be pure interest. That means that only a small fraction of your payment actually goes towards lowering your principal balance. For example, if you make a $100.00 minimum payment on a high interest card, about $13.00 will be taken off your bill. The other $87.00 will be considered interest, or “The vig” in extortion terms. I say that because the majority of creditors are nothing more than mob loan sharks. Actually, worse, at least the mob is honest about what they will do to you if you don’t pay up. Pay as much as you possibly can every month, and if it truly is the minimum, than fine.

Rule four: If you can’t make your payment on time, call the creditor.

The absolute worst possible thing you can do is not pay and not call. This tells the creditor that you don’t take this debt seriously, and will likely wind up with them making a negative report to the credit agencies. That will directly affect your credit score in a  negative way. Call them, tell them you can’t pay right now and ask them for more time. You might get told absolutely not, but at least you made the effort to call them. This ways in your favor when they consider turning the account over to collections or not.

Those are a handful of guidelines that can greatly improve your credit card management. If you feel deep down that what you are doing is wrong, then it likely is. Treat your debts as a top priority and it will show, and the benefits will be many.

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If you find yourself stuck with a poor credit rating, and many people do, you probably have given up on the thought of ever owning a credit card again or getting approved for a department store credit card. The credit rating system can be a self-consuming paradox, because you might not be able to repay your debt due to economic circumstances. Not because you’re a dead beat, but because that is life sometimes. Then when you’re unemployed, you need to eat somehow, so you use your credit cards to live on in the hope that you will get a new job soon and pay it all back to catch up. If only that were true right?

What really happens is that you finally get work again, but are reluctant to hand over all of your new money to the credit card companies. Believe it or not, they WANT you to do this. The more screwed up you are, the more money you will owe them. Even if they know you’ll never be able to pay it back, they want to get as much debt on the account as possible because it will generate a higher cash payment on your account when sold to debt collection agencies.

So you can see that this cycle could and does go on forever and ever until you die or go bust. One option you have when you are in the credit crapper is to get a secured credit card. This is a credit card that is issued to you only after you have sent the issuing bank a security cash payment for them to hold against the credit card account. The amount of the security deposit is often the exact same amount of the credit card limit. That tells you one thing, they don’t trust you for anything. This way if you don’t pay your bill, they just use the security deposit to pay it off and then cancel the account altogether.

Secured credit cards normally carry horrible interest rates, like 26% and even more sometimes. This is not the reason you want this credit card though, and everyone knows that. You use it to show the bank and credit reporting agencies that you can pay your bills on time now.

The best advice to follow when it comes to secured cards is to NOT use them like a regular credit card. DON’T go running the card up to the very limit and then be late with the next payment. This will only worsen your credit rating. Use it once or three times a month to buy something for $50.00 and then pay it off every month. Before long, they will likely send you an offer for a credit limit increase. That is up to you, if you feel you can handle having more credit then by all means go ahead, just keep in mind what got you to that point to begin with.

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