The best way to protect yourself from a negative credit history is to pay your bills on time and follow some basic sound financial plan.

That sounds easy. We know. But the fact is that many people start out with the best of intentions, only to find that they are unable to follow that plan. Illness, divorce, loss of a job or similar unforeseen circumstances sometimes force people into situations where they simply are unable to make timely payments on outstanding accounts. This is when the credit nightmare starts for most people.

Because contrary to what a bill collector may tell you, most people do not ask to have credit problems. More times than not, it happens to good people who found themselves in a bad position. Unfortunately for these good people, each and every miscue ends up on their credit profile. One problem leads to the next, and it appears as if everything is spiraling out of control without an end in sight.

The truth is, however, that for most people there is an end. It is also true that there are ways to regroup and move forward. The question is what can you do to reverse this trend once you are able to?


Step 1 : HAVE A PLAN
There is no substitute for a good plan of action. After a catastrophic event, you have two choices. Accept it and do nothing. Or take the initiative and regain control.

Obviously, the latter is the better course of action. How you do that is based upon your specific situation. But there are some general principles that apply. You must look at your financial situation and act accordingly.

The single biggest problem most people have is living beyond their means. You must stop spending more than you can afford. Even if it means that you have to sacrifice some of the little things for a while. If it is possible to earn more income, do what you can. If not, spend less. It is that simple. Your credit profile will improve as the amount of debt you have decreases.


Step 2 : TRY TO REBULD YOUR CREDIT
Most people are under the impression that once their credit is destroyed, it is impossible to regain a positive credit rating. Often, these people allow themselves to deny themselves the good things in life that they deserve. And what is worse, they actually believe that they do not deserve to live a better life.

The stigma of guilt that is attached to being in debt can be overwhelming, and often destroys families for years. The good news is that it doesn't have to be that way. There are proven strategies that will help you re-establish and rebuild your credit and improve the quality of your life. It is up to you, however, to educate yourself and implement the strategies that work for you. It often appears as if there is no way to do this. There is nothing further from the truth.

Believe it or not, it is sometimes easier to get credit with a bad credit rating then it is with a good one. Some ways to do this are:

SECURED CREDIT CARDS  There are many lenders who will give you a credit card with a balance equal to a deposit in a savings bank. This is known as a secured credit card. Usually these cards have low limits-$300-$400-but the limit can often be higher if you put a higher deposit in their bank.

Your deposit earns interest, but not enough to offset the interest rate associated with the credit card. A secured credit card works to the benefit of the bank to some extent because they know that if you default, they can pay your credit card off by using the money you deposited in your savings account. They provide security to you in much the same way, because you know that if you have to pay the account off in an emergency or simply because you want to, the funds are on deposit for that purpose.
The interest rates on these accounts may not be the most favorable in the industry. At this point, that's not important. The idea is to get the card, use it regularly and make regular payments of at the very least the minimum amount. A few dollars more than the minimum is even better. New creditors want to see a track record of good payments. As strange as it sounds, what they do not want to see is a credit card that is paid off every month. They want to see how you handle credit. Not how you avoid it.

LEASE A CAR  Another way to rebuild your credit is through a car leasing program. Again, you must be careful not to overextend yourself, but car leases are generally easier to get than purchases. This is probably because it is easier for a leasing company to repossess a leased car. You should not concern yourself with that. You are not going to have that problem. Most car dealers offer a leasing program on new and used cars. Surprisingly, deals on new cars are often more affordable. These programs may be started with a relatively low down payment. But be careful. Leases often limit mileage to 12 to 15 thousand miles per year, and charge substantial penalties for mileage over that amount. So if you are going to be doing a lot of driving, a lease is not for you.

OTHER CREDIT  Rebuilding credit means that you have to get credit. Even if you have filed a bankruptcy, it may be much easier than you think. You will soon find that you are getting offers from department stores, furniture stores, mortgage companies and the like.

Savvy lenders know that once you have filed for bankruptcy, it will be a very long time before you can do it again. They offer credit at a higher rate and with restrictions that would make the credit unaffordable to most people. Depending upon your circumstances, these offers may or may not make sense to you. Be careful not to be lured into a bad deal just because you want credit. That is probably how you got into trouble in the first place. Then again, don't be afraid to make intelligent choices that will help you in the future. A couple of small accounts with payments made on time for a year or two can do wonders to your credit history and may get you started on the road to recovery much faster than you might think.