Help me help my friend solve his credit problem?

Question

I have a friend who constantly borrows money from me. He doesn't manage his money well, but he's gotten alot better over the year. However his credit is bad. He owes Student loans, and has a couple of collection agencies after him for some small payments (about $200-$2,000 between the 3 or 4 old "bills") and is usually late on his bills. However, he does pay those bills which is a short plus i guess.

I'm not lending him money anymore but I want him to get better as he's really a smart guy. The "good" part is that he's fairly young at 27. My question is - is it possible for him to rebuild his credit and how? Should he call up one of those credit consilidation companies that I always see adverts for? And lastly, how long might it take to regain "good" credit?

He seems to think he's done for.

Answer 1

The best thing you can do for him is to stop lending him money. If he maintains a steady job and gets financial counseling its never too late. I have seen some of my friends get divorced at 50 and loose everything and still bounce back. Good luck.

Answer 2

Glad to hear that you are no longer going to lend him money.  That's the first wise thing in the mix.  

Depending on where he's at (score wise) and what liabilities are there ~ likely 5-6 years to climb out of the hole.  

Get him to run his own credit check on line and see where he is at and clean up any errors on the report first.

He's then got to learn . . . somehow . . . to live within means.

Answer 3

First things first pay off the debts he has. Once he has done that, do what i call build your credit. That is, buy very cheap items with your credit card and instantly pay them with your other accounts. Do this several times as this will build credit. Although it might take at least a few years, it is a sure way to build up his credit.

Answer 4

Call all of them and work out a payment plan and try to get your interest lowered or stopped.

Then, make the minimum payments on every one of them. On the lowest dollar value, put all your extra effort toward paying it off. Once it is paid off, then roll that extra money to the next largest balance. Continue this snowball until all your debts are paid off.

You probably need to cut your expenses back to the bare minimum. Get rid of cable, cell phones, internet, etc. Lower your electric bill, gas bill, water bill, etc. Don't eat at a restaurant until your debts are under control.  Take a sandwich for lunch.  Cancel the gym membership.

Try to increase your income by getting a second job. If you have a car with payments, get rid of it, and buy a good dependable used car for CASH.

Go to the library and get "The Total Money Makeover". Read it and follow it carefully.

Go check out Dave's website as well.  Yahoo is blocking his site again, so take out the spaces in the following:

www. Dave ramsey. com

Answer 5

Nice of you to try and help your friend - pass this along to him.

There are a few things you can do right away to boost your score - this is a 30-60 day process.

1. Order your credit reports from the 3 bureaus

www.equifax.com

www.experian.com

www.transunion.com

If you're ordering for the first time, get your score (for a fee) from Equifax as their scoring matters most.

2. Make copies of your report and put the originals in a binder. On the photocopied reports use a highlighter and check for any incorrect, outdate, false, etc...info

3. Download a dispute letter(s) from the credit bureaus website and list anything that is wrong. Mail them to their office(s). They have 30 days to reply.

4. If they will not remove something that is not yours or too old (> 7 years) as them for a debt validation. This may take an additional 30 days.

5. Once the 'baddies' come off, take care not to let any of your other accounts fall into that predicament.

6. If you haven't already make sure your existing accounts are current and paid on time ALWAYS.

7. Get a secured credit card with www.capitalone.com or www.mastercard.com for like $500-1000 or more if you can and use it sparingly. Charge like $50 on the card each month and pay it in FULL and on TIME. Make sure you do this for a minimum of 6 months so that you estabish a positive repayment history.

8. Problem with just letting them (collections) 'fall off' is that they may never. You may get sued before that...that's where you suddenly get a summons to appear in court and a judgment for collection against you.

For collection items...pay them but get a 'pay for delete' from the collection agency in WRITING...they'll delete it after you pay and it will help your credit score.