Bipolar & debt: Repairing credit when you are not on your own
"For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows. -- Paul, 1 Timothy 6:10"

Your mental health can play a crucial role as to how your financial health will be. If you’re suffering from extreme manic as well as depressive episode, then it could be a sign a bipolar disorder.

It can trigger incessant, impulsive purchases that may jeopardize your financial stability and in turn, wreck your credit and put it into utter bad shape.

So, how do you deal with the situation and come out of it unscathed?

What exactly may happen to you

If you’re seeking to get out of debt, repair your wretched credit, and lead a financially as well as mentally stable and happy life, then you can either work with an expert or if possible, do-it-yourself to come out of your life’s crises.

But, mind you, your bipolar symptoms may interfere with your efforts to salvage your financial life from the impending disaster. This is because you could feel useless and ruminate hours on end, telling yourself that you’re no longer employable or have lost the capacity to work. That, in turn, may overwhelm you with intense stress, subsequently putting you into depression.

Tackling stress and creditors, besides all the complex credit repair processes may add to your anxiety. Still, there’s a silver lining to your endless woes. You can resolve your financial problems and improve your credit through a less complex process, if you abide by the below mentioned commandments.

How bad credit hurts

There are numerous disadvantages of having bad credit. Some of them are given below so that you’re inspired to repair your credit and avoid making anymore blunders in the future:

  • Costly financial options - During crisis, bad credit hurts more than anything else. No matter what option you choose to get out of the debt rut and improve your credit, each one of them will be a lot costlier.
  • Unattractive subprime loans - Due to bad credit, lenders will reject your loan applications and even if you get one, it’ll charge higher fees for the loan. Moreover, your bipolar disorder could further put you into shame and guilt, and erode your self-esteem. To boost your morale, provide incentives to your loved ones and fix your broken relationships, you must work on improving your credit.
  • Sky-high rate of interest - Interest rates on debts like credit cards are compounded. So, even a percentage point rise of your card’s interest rate will send your total balance through the roof.
  • Exorbitant insurance premiums - Insurance companies will want to have a look at your credit score to rate your coverage risk. They use it determine the cost of your insurance policy, i.e., the premium of your coverage.
  • Poor monthly paycheck - Many employers check credit scores of their prospective hires and if they find it below the mark, then they reject those job aspirants. Similarly, employers factor in credit rating during annual appraisals or promotions. So, make sure your credit is impressive, if not excellent.

What are the components of FICO score

Before you get down working on credit repair, it’s important you understand your FICO score well.

To start with, FICO scores are determined out of a 100-point system. It has five major components. They are:

  • Timely debt payments - 35%
  • Credit to debt ratio of an individual - 30%
  • Frequency of loan applications by an individual - 15%
  • Types of loans held by an individual. For e.g. installment loans, credit cards, bank loans, etc. - 10%, and,
  • Age of all accounts held by an individual - 10%.

As evident, the most crucial factors you’ll have to take care of are: (a) timely debt payments, and (b) debt-to-income ratio that should be under 30-50% with respect to the total available credit limit.

There could some exceptions, though, in the way your credit score is determined. You’d be able to steer yourself and your poor credit health out of the crisis successfully, only if you work on ways to repair your credit.

How to repair credit

  1. Check credit report - Your foremost task would be to grab a copy of your credit report from each of the three leading credit bureaus - Experian, Equifax, and TransUnion. You may pay for some of the premium services provided by the credit bureaus to gain access to a detailed credit report as well as tools that are necessary to help you bump your credit rating, and even to ward off identity thefts, if any. You can ask for one free copy of your credit report from each of these credit bureaus at AnnualCreditReport.Com. Make use of the privilege wisely.
  2. Learn about credit repair - Visit the websites of the credit bureaus and read the educational or self-help resources provided in there to improve your credit. You may have to spend a dime or two, but the information you’ll receive are worth investing for.
  3. Clean up credit report - This act is the single most important part of your credit repair plan. Read your credit reports carefully. Weed out any item like a negative tradeline, an alien credit account, or anything you find amiss or you don’t recognize. You need to ensure that information in all of your credit reports are the same. Have your personal details like name, address, and Social Security verified and if needed, rectified. Apart from that, ask your credit bureaus to remove duplicate accounts that are reported because of mergers of banks or retailers.
  4. Send letters to the credit bureaus - It's another part of the credit report clean up process. As per the Fair Credit Reporting Act (FCRA), you can ask your respective credit bureaus to remove or correct a dispute related to an account on your credit report. Within 30 days of notification, the disputed item should be removed by the credit bureaus. However, you’ll have to furnish a copy of all your proofs and explain your stance properly in writing. You can find a sample of the letter to dispute your account status here.
  5. Never be a victim of credit repair fraud - There are no magic wands to improve your dismal credit rating into something attractive overnight. You may accross many phony companies that would offer to repair your credit in exchange for some service fees. But that’s unnecessary and you should be wary of them.

You’ll have to work hard to rebuild your credit and that’s a time-taking process. Say for instance, you’ll have to stop making too many hard inquiries, avoid opening way too many credit accounts (more than what you can manage), not checking your credit card statements for faulty billing or identity theft, etc, if you’re serious about becoming a sought-after borrower for the creditors. You can read the guidelines to differentiate a credit repair scam from the a good, respected credit counselor.

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