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I've known more than a few people in my lifetime who have trashed their credit (and if you've ever served in the military, you no doubt know tons of these folks, too). Damaged credit makes many aspects of life much more difficult than they would be otherwise. It is therefore a good idea to get to work repairing your credit as soon as possible, should you find yourself in this situation.

When your credit score is in the dumps, you will find yourself in the "sub prime" lending class (it isn't just about home loans!). Loans are much harder to come by when you find yourself in this category, but they do exist. The type of loan that will most likely be available to you at this point are personal loans. These are loans that require no collateral; in other words, you - your capacity for future earnings - is the "collateral." If you take out a few small personal loans and pay them back on time, your credit will begin to heal. You can even take out the loans simply for the purpose of paying them back. Just put the cash into a high yield savings account and pay the loan back out of that account, plus the difference (interest charged on the personal loan) out of your own pocket. You won't make any money doing this - in fact, you'll spend some money - but you will be well on your way to rebuilding your credit.

Typically, people with damaged credit also find themselves unable to get credit cards. This, too, creates a host of disadvantages, but these problems can largely be circumvented with prepaid credit cards. Prepaid "credit cards" are essentially debit cards that you load with your own cash. This type of card typically cannot help much with repairing your credit, but it does render your money into an electronic form that is more easily (and securely!) spendable online. For someone on a tight budget due to the costs involved in repairing damaged credit and settling debts, online shopping is an indispensable source for making life in general more affordable.

Finally, some words of encouragement: if you are in debt and your credit is bad, don't give up. It can be a daunting task reversing a situation like this, but hundreds of thousands of people have done it. If that many people have gone before you and pulled it off, then you can, too. Just create a budget, seek opportunities and grab them wherever and whenever they appear, and use the tools detailed here to your advantage. You will fix your situation and enjoy the brighter days that are ahead.

Learn more about this author, Paul E. Zimmerman.
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