Prepare for a Bad Credit Record

Having a bad credit record can be a nightmare for average people. Those with poor credit scores often can’t get bank accounts, credit cards, car loans, mortgages or even rent an apartment. They are often forced to pay higher fees for everyday services and to rely on substandard financial service providers that charge usurious rates.

An average person who sees that their credit score might fall in the near future because of job loss or debts they can’t pay can prepare for such a scenario. A little advance preparation can make life with a bad credit record a lot easier and more comfortable.

Talk To Your Creditors

The first thing that you should do if you think you won’t be able to make your credit card, mortgage, car loan or other payments is talk to your creditors. Call your credit card company, mortgage company, bank and the holder of your car loan and talk to them.

Many of these companies will be able to work with you if you’re willing to work with them. They might forgo a payment or accept smaller payments if you call and explain your situation. Creditors would rather accept a smaller payment than no payment because collecting bad debts costs money. One tip creditors will be far more willing to do this if you have a record of paying your bills on time in the past.

Don’t send in a partial payment or late payment unless the creditor says you can do that. Many creditors will still hit you with a late fee or send your account to collections if you make such a payment without an agreement.

Get More Than One Bank Account

One of the biggest difficulties people with bad credit have is opening a bank account. Many people find this out the hard way when their bank account is closed because it gets overdrawn. Any bank account can quickly become overdrawn because banks are quick to charge high overdraft fees these days. This can be particularly bad for people with direct deposit because all of their paycheck could be taken to cover overdraft fees.

Every person or family should have at least two different checking accounts at two different banks. Open a second checking account at a second bank and keep a minimal amount of money in it. This way you will have a bank account available if your main bank account gets overdrawn.

If you have direct deposit have part of the direct deposit placed into the second bank account. That way at least part of your salary will be available if your bank account is overdrawn. It also means that you can simply transfer all of your direct deposit to the second bank.

Remember, a bank can turn you down for a new account because you have bad credit. They can’t close an existing account because of bad credit. So open a second account now.

Protect Your Savings

People save money because they want funds available in future emergencies. This means that you should take steps to make sure your savings is available in times of financial difficulty.

The best way to do this is to put at least 10% of your regular paycheck or government benefit into a savings account. Even if this means you have to pay the minimum on your credit card bills. This means you will have at least some funds available in a time of emergency.

To protect your savings don’t get overdraft protection that links your savings account to your checking account. Even though your bank recommends it, this is a great deal for the bank; but a lousy deal for you. This feature enables your bank to raid your savings to cover overdrafts on your checking. Such overdraft protection could quickly eat up your savings. Instead get overdraft protection linked to a credit card if it's available that way you can pay overdrafts in the future and still have your savings available.

All working people should prepare now for the possibility of having a bad credit record in the future.