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When your credit file is filled with unpaid defaults

Understand that life happens and sometimes, you have to deal with some financial setbacks. Loss of employment, illness and relationship breakdowns may make repayments difficult.
unpaid defaults can be fixed

This article discusses ways to repair your credit rating by removing unpaid defaults. Are you experiencing financial hardship? Is this leading to unpaid defaults? You are not alone.

Identify the reasons why you have unpaid defaults

Understand that life happens and sometimes, you must deal with financial setbacks. Loss of employment, illness and relationship breakdowns may make repayments difficult.

In other instances, it could be as simple as poor bookkeeping practices, not keeping your receipts, moving to another address or data entry issues on the part of your credit provider. But whatever the reasons are, don’t let them deter you from pushing for a stellar credit rating.

Remember that creditors report that you’re on default when you are 60 days late with your monthly payment. It will serve as a warning to potential creditors that you have defaulted on your obligations and could do it again with another lender. Understand that paying off the unpaid defaults does not necessarily mean that you can erase those entries from your credit file. They will stay there for years. But, if you don’t pay them off, it could be worse.

Clean up your credit file

The best way to do this is to simply update your payments. You may think about debt consolidation if you have multiple credit card debts and other consumer debts. You can get a new loan to pay off all your debts. By doing this, you can reduce your monthly payments, possibly reduce the overall cost of the loan and simplify your payment. It could help you build up your credit again by reducing your debts and making it easier for you to pay on time.

By fixing your impaired credit file, it would not only become easy to obtain finance but cleaning up your credit file can also give you a wider range of lending options. Remember that lenders approve clients based on their borrowing capacity.

This refers not only to their ability to repay their debts but also to their credit score. You may also qualify for low-cost loans which may not be possible if you have a poor credit score unless you opt for specialized lenders who provide affordable loan products for bad credit borrowers.  Of course, the interest you pay on a loan would dramatically decrease as well.

Request a copy of your credit file

You can request a free copy of your credit file from the major credit bureaus in the country. Check them for errors, and if you see inconsistencies or inaccuracies. Sometimes unpaid defaults on your file are a consequence of an error made out of your control. You can file a dispute at the credit agency involved.

Or, you may also file a complaint with your credit providers and ask them to update the report.  Sometimes, there are unjust listings or mistakes due to human error. So, make it a habit to ask for a copy of your credit file each year so you can easily contact the creditor concerned and talk over the issues with them.

While it is possible to directly file a dispute with the reporting agency, they will not remove the negative entry without the approval of the creditor or at least valid proof that the entry is erroneous or inaccurate. There are also credit repair specialists that remove defaults on your credit file.

Consolidate your loans

You can apply for a second mortgage to consolidate all your high-interest loans into a single, easy-to-pay loan. You could save money on unpaid interest and late fees by rolling all your debts into one. It is also a lot easier to remember because you only have one due date to recall each month.

If you’re still unsure whether you can make timely payments because of your busy schedule—you can automate payments to ensure that you can pay on time.

This will not only clear up your old debts and help you start with a clean slate—but debt consolidation can also help you rebuild your credit score fast your potential lenders would also see the improvement on your borrowing habits and you are most likely to qualify for low-interest and bigger loans in the near future.

Develop good financial habits to prevent unpaid defaults

After you understand the importance of paying off your debts, it may be time to look for the best financial products when you need them. Look for specialised lenders that offer accessible and affordable loans when you are finding some difficulty in managing personal finances because of cash flow shortage due to emergency situations. Afterwards, make it a habit to check on your budget and make some adjustments in order to save more and spend less son a day to day basis.

You can stretch out your dollars and avoid debts by sticking to your budget. Budgeting is important not only for low-income earners but for high-income earners as well.

It is important to make the most of your incoming savings so you have some money to tap into when emergency situations like car repairs, urgent home renovation hospitalisation arise. By doing so, you can avoid being chased down by debt collectors for your unpaid defaults and you don’t have to rely so much on another loan to bail you out.

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