There are many ways to improve your credit rating, but paying your bills on time is the best way.  As we all know, unexpected things happen that prevent us from being able to pay our bills on time.  Maybe it's divorce, sickness, losing a job or just overspending.  Whatever the reason, there is a way to keep creditors from giving you bad credit.

Contacting Creditors Makes a Difference

Don't wait until your creditors have to contact you by phone, mail or e-mail about a late payment.  As soon as you know there is a chance you are going to be late paying a bill, talk to your creditor immediately.  Keep your good credit rating with them by explaining why you can't pay at this time and have a date to give them when you plan to bring the debt up to date.

When contacting your creditors early, have some alternatives to offer to see if they will be willing to consider them such as refinancing your loan, reducing your monthly payment, deferring a payment, dropping late charges or allowing you to pay only interest on your loan until you get your finances in order.

Your creditors might suggest that you consolidate your debts or go to a reputable credit counseling service.  If you choose to go for counseling, you'll receive helpful advice on how to develop a budget and other money management tips that will help you improve your credit rating by solving your financial problems.

Improve Credit by Paying Bad Debts

You might be wondering if there are other ways to get a better credit rating.  One step you can take is to focus on paying off debts that you have stopped paying on or ones that are not current.  As a debtor, you can acquire a list of the accounts past due or collection status from your credit report.  Once you obtain this list, you should start making contact with local creditors in person and out-of-town creditors by phone or letter.  Some companies may have sold your debt to collection agencies, so you would need to contact the agency.

How to Negotiate with Creditors on Debt Owed

Perhaps you're considering approaching a creditor with a debt negotiation.  Maybe it's a medical bill payment, unsecured personal loan or department store credit card you are struggling with.  You might find that these small lenders will be more than willing to discuss a negotiation or settlement plan with you.  This action would benefit your creditor more since this would keep them from having to turn your account over to a collection agency or potentially lose the account entirely if you file for bankruptcy.

When talking to your creditor, always be courteous and honest.  Let them know that you are trying to get your finances back on track and explain your financial situation to them.  Before negotiating on a settlement with a creditor, prepare a budget so you will know exactly what you can afford to pay.

If either you or your creditor can't come up with a settlement, stay persistent on contacting them.  If you do reach an agreement, get it in writing.  Keep records of all phone calls, letters or any other document pertaining to your settlement.

Review Credit Report on a Regular Basis

Once all payments on past due accounts are made, make sure each creditor reports to the credit bureau that all accounts are paid.  Always remember, as a debtor it is your right to be notified by a creditor of any negative information placed on your credit report.  If you aren't notified, then your creditor will be in violation of the Fair Credit Reporting Act.

Use these ideas to either prevent bad credit or to resolve issues that are already causing you to have a bad score.  You'll soon be back in the game for better interest rates and overall peace of mind!