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A Budget Can Help You Fix Bad Credit Woes

By Francine L. Huff
Mortgage Credit Problems Columnist


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No one plans to have bad credit and have trouble paying their mortgage loan. But if you find yourself in this situation, you must take action to solve your problems. One way to get back on track with your finances and resume paying your mortgage loan is to set up a budget.

Where Are You Now?

Most people avoid budgets like the plague, but using one can help you establish a roadmap for cleaning up your bad credit. List all of your monthly sources of income. Then go through all of your monthly expenses such as mortgage payments, utilities, auto loans, and insurance. Determine which expenses are fixed and which change from month-to-month. Don't forget to include the amount of money put into savings or retirement plans.

Compare Income to Expenses

More than likely, if you have bad credit and have problems paying your mortgage, your expenses are probably higher than your income. Take a look through your expenses and see which ones you can eliminate, such as dining out, cable TV, or entertainment expenses. Be prepared to sacrifice things that aren't an absolute necessity in order to help clean up your bad credit.

Examine the Details

Take a close look at any credit cards or other loans you have. Are you paying too much in interest? If so, try to negotiate with creditors to lower your interest rates. Consider applying for a debt consolidation loan to get your payments under control. But keep in mind that a debt consolidation loan doesn't mean you should go out and run up new balances on your credit cards or open new lines of credit.

The short-term goal of setting up a budget is to help you find the money you need to get back on track with your mortgage loan payments. But keep in mind that for the long term you should be looking at being able to save a portion of your income each month, no matter how much you earn.

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