Failure to repay the credit extended as agreed, paying only the minimum payment due and assuming they have great credit is where most people get in trouble.

Late payments affect your credit history. It doesn’t matter that the credit card balance is only $5, or that the payment is only one day late, or that you pay the late fee. Failure to pay on time will put a black mark on your credit history, one that will last for a year or more.

Minimum payments are another trouble spot. While making the minimum payment is acceptable, it does very little to reduce your outstanding debt.

Don’t assume you have a great credit history just because of the continuous offers for revolving credit you receive in the mail. Make sure that you have credit when you need it for a mortgage or a personal loan. You don’t want to be denied due to poor history or overextension of credit cards.

Getting help

If you do experience unexpected financial difficulty or need to clean up your credit, don’t be afraid to ask for help. If you fall behind on payments, the worst thing you can do is to wait until you are so far behind that your creditors resort to collection agencies. By contacting your creditors right away, you may be able to make lower payments temporarily, until you get back on your feet. Be sure to get all agreements in writing.

If you are unable to make your monthly mortgage payment, the best thing you can do is to contact your lender immediately. Doing so just may help you avoid foreclosure. Many lenders will work with borrowers who have a good payment history to arrange a temporarily reduced payment plan. Some lenders may reduce or suspend your payments for a short time. Others may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt. But the only way they can help you is if you tell them you need help.

If your credit standing is less than stellar, there is good news. It may take some time, but it can be fixed. If you work to reduce your debt by making regular, on-time payments for at least a year, your credit history will be much better looking to future creditors. You can also contact a professional financial counselor or a credit- and budget-counseling agency, if you need help developing a budget/debt reduction plan:

National Foundation for Consumer Credit

2000 M. St. NW, Suite 505

Washington, D.C. 20036

Phone: (202) 677-4300

Website: www.nfcc.com

Another good resource on credit is www.myfico.com. You can also get help from a credit service, where you can review, protect and learn what steps you need to improve your credit.

Although establishing or regaining good credit may take time, once you start making on-time payments, your credit history begins to improve.

• Aaron Ely is a senior mortgage banker from Ahwatukee. Reach him at (480) 636-6207 or aaroncely@hotmail.com.

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