How To Rebuild Your Credit After Long-Term Unemployment

Has your credit score experienced a great dive since you lost your job? Long-term unemployment is one of the unforeseen circumstances that can make you default in your payments and mess up your credit report. You need to take conscious steps to rebuild your credit after long-term unemployment.

Rebuild Your Credit

01 How Much Money Will You Be Making On Your New Job

First, you need to know what you’ll be making in your new job. That will give you some idea about the lifestyle you can afford and what you can afford to put towards getting your credit back on track.
Your first paycheck will give you a true idea of what you’re going to make enough month.

02 Create or Update Your Household Budget | Rebuild Your Credit After Long-Term Unemployment

Next, create a budget including all your known expenses. For your debt payments, use the regular or minimum monthly payment. Paying extra to catch up is part of the plan to rebuild your credit, but first, you have to figure out how to pay your regular monthly expenses. At the end of the budgeting process, calculate how much money you’ll have leftover after paying bills. It is the extra money you can put toward catching up on your bills.

03 Stop Living off Your Credit Cards | Rebuild Your Credit After Long-Term Unemployment

During the long-term unemployment, you’ve probably been using your credit cards to make ends meet. Now that you’re employed, you’ll have to start depending on your income to pay the bills. Breaking your credit card dependency may be hard, but it’s a necessary step if you will like to rebuild your credit.

04 Make a List of Your Debts | Rebuild Your Credit After Long-Term Unemployment

Make a list of your debts. Note which debts are current and which are past due. For all that is past due, list the amount of the delinquency and the number of months past due or the collection or charge-off status.

What to Catch up on First?

After long-term unemployment, you probably have multiple debts to pay. Figuring out which order to catch up on your bills can be a tough choice. Your mortgage and car loan should take priority over your credit cards, particularly if you don’t want your home foreclosed or your vehicle repossessed. If either process has already started, contact your lender to figure out what you need to do to catch up. Ask if there’s a way to spread the past due balance over several months until you’re all caught up against it.

However, if you’re not behind on your mortgage or auto loan, but on multiple credit cards. If you have any that are close to being charged-off, that is. Approaching 180 days or six months past due, try to catch up on those payments to keep the account from being charged-off or being sent to collections.

Unfortunately, you may not be able to save all your accounts. Choose the card with the issuer who you want most to remain in good standing with. For example, if you have a credit card with the same bank as your checking account or mortgage loan, you may try to save that one. Or, if you have an American Express credit card, you may try to save that one.

Cleaning Up | Rebuild Your Credit After Long-Term Unemployment

Rebuilding your credit after long-term unemployment can be tough. But there are a few tactics that may help you clean up your report. If high credit card balances are hurting your credit score, the solution is to pay these balances down. You probably won’t be able to do it all at once, so take it month by month, paying as much as you can toward one credit card until you’ve paid off that balance, then moving on to the next credit card.

Consider contacting a consumer credit counseling agency that can work out a debt management plan with your credit cards and loan accounts. You’ll pay one lump-sum payment to the credit counseling agency, and they will, in turn, pay all your accounts.

Note that your utility payments, cable and internet, and cell phone don’t affect your credit as long as your payments are made on time. Many utility service providers do not report to credit bureaus, so falling a month behind may not affect your credit score if as long as you get caught up. However, if these payments become severely past due, to the point that your services are disconnected, your credit is at risk. Cancel the services you no longer need if you can no longer afford the monthly payments to protect your credit.

Get Positive Information

Taking care of the negatives will help rebuild your credit card after long-term unemployment. But, you’ll also need positive information to help improve your credit score. If you still have open accounts, making timely payments on them each month will help improve your credit score. But, if all your accounts have been closed, you’ll need new ones to rebuild your damaged credit completely.

Focus first on taking care of your past due bills. Then, once you’re caught up, consider getting a new credit card. Secured credit cards and other credit cards for people with bad credit are good prospects. Remember, once you get started with credit again, to handle your credit cards responsibly, charging only what you can afford and paying on time every 

 

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