I'd suggest reading the following:
Common Abbreviations
Credit Scoring 101 - great for knowing what is in your credit score and to see how your score is impacted.
What Steps Do I Take - great for learning the repair process.
and Example letters - PFDs, GWs, DVs, etc.
First off, kudos for doing whatever it takes. Three years ago, I came here with FICO scores in the low to mid 500s, with many, many CAs and COs reporting and coming after me with several lawsuits for unpaid debts. I was scared. Looking back on it though, it was no big deal. It just seemed that way at the time.
Draw a line in the sand. Pick today as an example. Vow and make a personal pledge that from this point going forward you will never ever never ever be late on anything again. You might have some residual stuff from the past coming after you, but focus on the future. If you do that, then in 7 years you will have no debts reporting on your CR. Seven years in set by the Fair Credit Reporting Act and all of the negative stuff reporting will go away before then if you keep your nose clean.
So, if you make that pledge you will never ever be late ever again. If you think you might be late going forward, then you need to take steps to fix that. If this is the case, then you probably are spending more money than you are taking in. Create a written budget and include the basics like housing, utilities, food, clothes, transportation, etc. After you do that, then whatever is left over you use to throw at past debts (stuff that came before the line you drew).
If you have nothing to throw at past debts then there are things you need to do to your personal finances to have the ability to tackle the past stuff. First you need to decrease your expenses. Here are some suggestions:
- cancel cable.
- Stop going out to eat or cut your entertainment budget.
- If you have a cell phone, cancel your home phone. Look at your cell phone bill, if you aren't using all of your minutes and aren't locked into a contract, then you may want to cut the minutes and possibly save. Or if too many minutes are used, new plans are out there for a lower price for lots of minutes thus creating some savings from overage charges.
- Look at your car insurance coverage, you may be over insured; if you cut some of that (e.g. medical, rental coverage, etc.) you could save some money.
- If you have health insurance, look at a high deductible plan as an option if you don't have that already.
- If you have any hobbies, suspend them temporarily. You can always pick them up after getting out of debt.
- If you have any subscriptions, temporarily cancel those.
- If you bank at a bank and they charge $$$ to keep your money in there, then consider switching. Some banks charge $10+ per month and that can add up.
- Suspend any savings programs.
- Look through any active bank account or CC account and look at every receipt. As yourself: Did I really need that? If the answer is no, then avoid it in the future.
Then there are things you can do increase your paychecks:
- If you are saving via a 401(k), stop it temporarily.
- If you got a refund this year, then you are paying too much in taxes. Take your refund and divide it by the number of paychecks you get in a year. The answer is how much you need to have your taxes adjusted on each paycheck. When you start employment anywhere, you fill out a W-4. Ask for a copy of that form (or print it via irs.gov) and lower your tax burden. You don't need to put a set # of dependents. You can put a fixed $$$ amount. So if you paid $5000 last year as the bottom line on your 1040, just divide that by the number of paychecks and that is what you need deducted. You won't get a refund, but you'll have more money by which to budget.
- Do the same to state as you did with federal, if applicable.
- Ask for a raise. Never hurts so as long as you don't bug anyone and you do it once. Or ask for advancement if possible. I owe a few businesses and respect the person who shows initiative and asks for a promotion. Most of the time I'll give it or make arrangments for the future.
Finally, increase your income:
- Working two jobs with 4 kids is a challenge I bet. I have 4 kiddos too, but DW stays at home. I can't imagine what it would be like raising all 4 on your own. I'm not going to suggest adding a 3rd job, but as you see opportunity, like working a special shift here or there or overtime once in a blue moon, then grab it if you can.
- Look around your house. See if you can't get rid of any junk or stuff you haven't used or needed. There's a huge market on places like Craigslist of folks looking to buy that eyesore piece of furniture you never needed.
- Sell off any non-retirement savings and use that to paydown debts.
- You mentioned two cars. If you have one that you aren't using, then sell it.
- Look for other ways to capitalize on your talents to make money.
Now, if you budget is in check and you have extra money to throw at the debts, then follow the steps in the links above. Keep an eye on your SOL. SOL is set by state law and is the time frame a creditor has to sue you for the debt. Don't do anything to a debt (payments, letters, etc.) until you either have the $$$ to PIF or SOL expired. Doing anything inside SOL can get you sued. CRTP is the time frame a creditor can report. This is generally 7 years for virtually all baddies. So, CAs and COs are removed 7 yrs from the DOFD. DOFD is the date you first went late and never recovered. So, for example, anything that first went late in 2003 will have been deleted by year's end, depending on the date. You may want to pull your reports from annualcreditreport.com. It's free. DOFD will be listed on EQ. TU and EX don't list DOFD, but they'll list the drop off date. Subtract 7 yrs from that date to get DOFD. SOL is also based on DOFD, assuming you don't admit to it or make a payment.
When starting, focus on the most recent debts first and work backwards. Use the steps above as a guide.
