Write a letter. While you will not be able to boost your score immediately, demonstrating to potential creditors that you are now a responsible adult and that the days of wanton spending–and missed payments–are behind you may help lessen your “labelâ€ as a potential risk to creditors. Consider writing a letter describing why you incurred such debt (e.g., medical expenses, a traumatic life event, job loss, etc). While it will not boost your credit score, the letter can give creditors an understanding as to why you look like such a risky bet.
Get a hold of your situation. The problem with students and credit cards is that credit cards seem like free money. Mom and dad got it all wrong; money doesn’t grow on trees– it comes in plastic. “If it gets to the point where it’s in collections, understand that that’s a really bad mark on your credit score,â€ says Stallworth. Get a handle on your debt by writing down every card you have and its balance. Then put all your cards in order from highest to lowest interest rate, Stallworth advises.
Next, if any accounts are delinquent, your goal should be to establish a current pattern of paying down your overdue bills, says Mechel Glass, director of education at the Consumer Credit Counseling Service of Greater Atlanta. Start paying at least the minimum balance on all your cards. If you have any additional money left over, put it toward the credit card with the highest interest rate, adds Stallworth: “The biggest thing you can do to boost your credit score is pay on time. Most importantly, do not make any purchases using the cards.â€
If you’re in too deep, find a counselor. For most recent grads, student loan payments, rent, car payments, utilities, and the other necessities of life — not to mention a sporadic splurge — can make dealing with debt overwhelming. If that is the case, consider going to a counselor. A counselor can help you navigate your personal finance landscape and create a plan for how to incorporate better money management into your lifestyle. To find reputable counselors in your area visit Consumer Credit Counseling Services or AAA Fair Credit Foundation.
Renita Burns is a staff writer at Black Enterprise.com.