I once had to tackle bad credit. I owed maybe $12,500 in debt buildup over almost a dozen years. One year ('96) I decided that I was tired of receiving updated debt collection letters. Per dun letter, I owed 23 different companies, with the largest single debtor being the govt--a student loan @ $2,350.00 principal. Never mind what the interest over a dozen years amounted to--though the interest was much, much less than is charged today.
Without even contacting the big 3 for a detailed run down of my credit history, what I did was this:
After monthly expenses, I had about $360.00 avg. left over per month to save or spend. Of that $360, I committed myself to $140.00 per month to begin to repay old debt. No more. No less. Here's what I set up:
I listed each debt smallest to largest. I made it my goal to begin paying up to 8 of the 23 companies 10% of what I owed them *each month*.
Debt #1 was $128.00 (lowest amt owed). So, my *first of 10 payments* over 10 month commitment =$12.80/mo @ 10 mo. I deducted $12.80 from the $140.00, leaving me $127.20.
Debt #2 was approx. $163.71 (if I remember right). Payment #2, then, was $16.37 over 10 month commitment. I deducted $16.37 from $127.20 = $111.63.
Debt #3 was $184.00 approx. Payment #3 was $18.40. I deducted $18.40 from 111.63 = $93.23.
Debt #4 was a $142.00 payment, too (ambulance ride my job insurance at the time didn't pay). Payment #4 was $14.20 from $93.23 = $79.03
Debt #5 was $218.00. Payment 5 was $21.80 from $79.03 = $57.23.
Working my way down the list, smallest debt to largest, when I initiated my little debt paying system, it turned out that within 10 months I had slated myself to pay in excess of $1,000 off in debt *in only 10 months time* (something I had had trouble conceiving myself doing unless I paid off my debts in this fashion).
There were 2 big bumps in the road, too. Two of my tax refunds were diverted by IRS ($3,100, $2,650) for the student loan debt. PAINFUL as that was, it did wipe out a significant amount owed on that $2,350 + interest debt, so...I stayed with my system.
Scheduled raises meant that I could increase the base from $140.00 to $165.00, and then increase it again from $165.00 to $180.00. No more. No less. I eventually wound up @ $260.00 debt repayment fund monthly (though this was way towards the end)--no more, no less--and as the months went by, I was able to add new, larger debts to my list.
NOTE: When there was mandatory OT on my job, I'd be all over it. Armed with the occasional super sized paycheck, I'd go to my list up to 8, and where there was the possibility to pay off a debt ahead of schedule ($80.00 and less still owed per company), then I'd pay off a debt or two in full, following my smallest to largest pattern *always*.
In doing that, I could then add Debts #8, #9, #10, #11, #12, etc. as slots opened, producing a revised list of 8 to whittle down all over again.
Last of all, I created a form letter. Very simple. Along with my final payment, I included my letter and a SASE requesting that a rep from the company *fill in the blanks* acknowledging that I had successfully paid Account # blah-blah IN FULL. Every single company complied. Name and title w/their company and not a single problem or delay.
Eventually, I had to stop entirely (layed off from my job). At the time I left that position, all I owed was $503.00 to one company (or basically, only 2 more $260.00 payments).
I hope my explanation has made sense, because I really did this ('96 - '98) and this worked--this system. My credit improved on sort of a de facto basis, though I lived the life of purely *cash on the barrel head*--NO CREDIT. If I didn't have the money to buy what I needed/wanted, then I COULD NOT HAVE IT unless I did. My kids couldn't have it, either (2 teen sons).
I have to admit that once I started, this stuff got to be almost addictive.
One Love, and PEACE
