Good credit gone bad

You've been good. Your credit cards are current. Up until now you've had stellar credit and you've been able to charge purchases to your credit card without giving it a second thought.

Now, it's uh-oh time.

You didn't see your employer headed for financial trouble. You're hanging on, but you've taken a huge pay cut.

Or, you weren't paying attention to your monthly statements and that zero-percent promotional rate on your balance transfer credit card has run out. You still owe big time.

Or, you were so busy racking up miles on your travel credit card that you weren't paying attention to how much you were charging and now the balance is, well, approaching obscene.

So what do you do when you find that your good credit doesn't look so good anymore?

  1. Stop using your credit cards immediately

    First, stop using plastic to pay. "When you see that your good credit has gone bad, you have to stop digging yourself a deeper financial hole," advises Gail Cunningham, vice president of membership and public relations for the National Foundation for Credit Counseling.

    You may think that it's safe to continue to charge purchases to your gas credit card and rely on your line of credit until you find another job. But in today's economy, Cunningham says, "the length of time it takes to get another job can be a lot longer than you ever dreamed."

  2. Make a credit card game plan

    Second, assess your situation, says Tanisha Warner, spokeswoman for Money Management International. Sit down and look at your credit card statements and see who you owe, how much you owe them, and what interest rate you're paying.

    "You want to create what we call a 'damage sheet' and make at least the minimum payment on each account," Warner says. "If you should have any extra money, use it to pay the credit card with the highest balance or the one with the highest interest rate."

    If, because of an emergency or a little unconscious overspending, you can't pay your credit card bills, call the company and try and sweet talk them. "It's very important that you stay in contact with the people you owe whether it's credit cards or your mortgage lender or the bank that has your car loan," Warner says. "Don't just NOT pay."

    Keep them in the loop, Warner says, because they may give you a grace period of up to 60 days or you may qualify for credit programs that help when it's time for some serious damage control.

  3. Rethink your finances

    Here's what else you can do to stop the bleeding when you're in over your head in credit card debt - whether it's your fault or circumstances beyond your control:

    • Scale back spending. Re-examine where your money goes every month. Lots of things you think are necessities may not be, Cunningham says. Do you really need to stop at Starbucks every morning on your way to work? You could save by brewing coffee at home and bringing it to work in a travel mug. Think how much you'll save if you do your own laundry rather than taking it to the cleaners every Friday. Does your teen really need to be able to watch movies on his smartphone? "It's easier to scale back spending than it is to increase income," Warner notes.

    • Sell it on eBay. You could raise some cash to pay off your rewards credit card by selling unwanted goods on eBay or by holding a garage sale. That flatscreen TV that you bought for the kitchen on a whim is just gathering dust anyway. "Garage sales are big moneymakers," Warner says. "You can make a few hundred bucks holding a garage sale once a month."

    • Get a second or third job. In this economy, that's easier said than done, says David Jones, president of the Association of Independent Consumer Credit Agencies. Need flexible hours? Look for ways to turn a hobby into an income source. If child care is an issue, look for something you can do from home that will bring in extra money - every little bit can help you pay down your Master Card and Visa bills faster.

    • Borrow from friends and family. If you find you suddenly need $1,000 to pay your student credit card bills, see if you can borrow some money from friends or family. If you go this route, be careful, Cunningham warns. "It could be awkward borrowing from family or friends and could ultimately damage your relationship," she says. Check with your church and charities if you have a real hardship. They, too, might be willing and able to help.

    • See a consumer credit counselor. "They can help absolutely," says Cunningham. Jones agrees: Having a frank discussion with a nonprofit consumer credit counselor can open your eyes and help you plan and make sound budget decisions. The sooner you seek help, the better, Cunningham adds.

If you're standing around the water cooler at work and hear layoffs might be in the works, be proactive, Cunningham says. "See what you can do for damage control. In a perfect world, you will be OK. But reality happens and, if you wait until you've dug a deep financial hole, it can make it more difficult to get out."