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How to Help your Family Members Repair their Credit

How to Help your Family Members Repair their Credit

Practicing sound financial principles may come easy for you, but you probably know someone who can’t quite seem to get the hang of managing their money. It can be frustrating and even heartbreaking to watch them make mistakes that can potentially be serious and life-changing, but you don’t have to just sit and watch. Chances are, they are just not informed about the tools and options available to them to help them manage their money, repay their debt, and repair their credit.

Here are some ways you can help your family members in financial despair:

Offer to review annual credit report

It’s not something you learn in high school, and not something many parents teach their children. Don’t assume they know either – the next time you notice a family member struggling financially, maybe after being turned down for a loan or asking to borrow money, ask them if you could show them a few things to help them fix their credit. One of the first things you can show them is how to access their credit report.

Show them the websites for the three credit bureaus and teach them how to access their free annual credit report. Suggest that you review their credit reports together.

Show them how to read it

Once you have a copy of their credit report, teach them what each area means, and its significance. Because the free credit reports don’t come with a credit score, you should also teach them how credit scores are calculated, and which areas of their credit report are most important in calculating the score. Identify problem areas, showing them how much credit card debt they have, their credit utilization ratio, and any late or outstanding payments that could be bringing down their score.

Offer Solutions

If appropriate, offer solutions for the problems you see. If they open up about relying on credit cards for purchases, perhaps you could offer to analyze their budget to help them find areas to save. If you notice they have a particularly high-interest credit card, you could suggest calling to negotiate a lower rate, or transferring to a card with no balance transfer fees and lower interest. Ask about emergency savings accounts, education savings accounts, etc. and tactfully explain the importance of such funds, and how to start building them.

There are several ways to dispute and correct incorrect information on a credit report, so suggest that they look into any information that seems wrong to them. If you notice only one or two late payments here or there, or you know they have been through some particularly rough times lately, you could encourage them to write a letter of goodwill to help some of those negative items be removed. Then, you could help them set up automatic payments to ensure they are always timely in the future.

Don’t overstep

Admitting faults, mistakes, and problems is not easy. It’s even more difficult being approached about our problems. It takes careful tact and a great sense of empathy to bring up such issues with our loved ones, but if we thoughtfully explain our intentions, repeating and emphasizing that our only desire is to help and see our loved ones happy and successful, then your advice may be better received.

But it is important to be extremely sensitive to the reactions of your loved ones. Pay attention to their body language and temperament.  If you notice them becoming uncomfortable about a certain topic, leave it alone. Losing their trust means they may not take your advice, and if your intentions are pure and to help, you’ll have the chance to discuss the sensitive issue when they feel more comfortable.

Suggest professional help

Some issues are too significant to be fixed on our own. Be realistic about how much you can do or that they can manage on their own. If necessary and appropriate, suggest that they look into professional credit repair services to help them get back on their feet.

Above all, make sure that they know they are loved and cared about. If that is the feeling and mood of the conversation, you will likely make great progress in helping your family members repair their credit and improve their financial situation.

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