I’ve officially re-joined the ranks of the credited. That’s right, folks: after what seems to be an eternity in debt (and spending an even longer time with an open account at collections agencies) I’ve finally built my credit score back to the point where I can get approved for a new unsecured credit card.

It wasn’t easy getting to this point, but I do have a few tips that will help everyone from people looking to pay off their large bills to people who have an open file at a collections agency and are near the point of being taken to court of their debts (of which I was one).

• Don’t ignore it, because that bill isn’t going away.

  No matter what you do, remember this: that bill isn’t going away. Those collections calls are not going to stop. The more you ignore the problem, the bigger it becomes.

  I wracked up bills that, after being laid off, I couldn’t pay. Month after month I would see these bills come in and I would hide them somewhere (out of sight, out of mind). I ignored them until those bills became collections notices, which ultimately ruined my credit.

  A big mistake and one I wish I could undo.

• Organize and keep track of everything!

  Bills, notices, telephone calls: keep track of it all. Write it down, store it in a safe place, and make copies for your records. Once you have everything organized then you can accurately keep track of what you owe and to whom you owe it.Once I had decided to get my life back in order I knew I was going to need a system that would help me organize all of my personal information. — including my debts.

  The best system, for me, was to keep track of everything in an Excel spreadsheet. Once I got everything down, I was shocked to see how much money I actually owed!

• Always think positive.

  That debt isn’t going to go away overnight. It’s often very difficult to think about tomorrow, next week, next month, or next year; but, if you constantly remind yourself that this is just a low point in your life,. You’ll be able to see the end of the tunnel you’re in, and eventually get out of it. Remember: being in serious debt is not a hopeless situation, but you must be proactive to get out of it!

• Change your spending patterns through tracking.

  At the peak of my debt I was paying for everything on the credit cards. My mentality was “oh, don’t worry about it, I’ll pay it off at the end of the month.” The problem with that line of thinking is that when the time came I could only afford to pay the minimum balance.

  The easiest way (I found) to track your spending habits is to bring a small notebook with you and write down what it is you bought with your credit cards and how much it cost. Then, at the end of the day, add it all up and put it into a spreadsheet. I guarantee that you’ll be amazed at how much those small insignificant purchases can add up!

• Do not stop communicating with your credit card company or collections agency!

  This may be a difficult pill for you to swallow, but most agencies that have a business model based around credit also have several policies in place on how to deal with people who can’t pay their debt, and selling your debt to a collections agency is the last thing they want to do!

  When I finally confessed to my credit card company that I simply could not pay my bill, they worked with me and we came up with a plan that would help me pay off the debt.

  This did involve my line of credit being cancelled, which hurt my FICO score, but it was not hurt as badly if I was placed into collections.

  In addition to working out a payment plan, the company also sent me several informational packets on how to handle debt.

• The real secret to fighting your way out of massive, debilitating debt is to simply be honest and responsible.

  It may require that you simply keep track of your purchases and limit yourself, or it may require a dramatic change in the way you live. But, in the end, it’s worth it. =)

[tags]credit card, debt, collections agency, FICO[/tags]