Credit Crunch

More than anything else, Sondra Page wants to be a homeowner again. But before she can qualify for a loan, she needs to raise her credit score. And, to raise her score, she has to cut her debt level. It’s a problem common to many Americans as today’s credit crunch is putting pressure on consumers like Ms. Page to pay off or make a significant dent in their debt.

To accomplish that, credit counselors say, consumers need a plan. “If your goal is getting out of debt the first thing to do is put together a strategy of attack,” said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas. Ms. Page’s debt problems started after the breakup of her 32-year marriage four years ago.

“When he divorced me, I didn’t have the finances to pay the bills,” said Ms. Page, 58, of Dallas, a finance clerk at a church school. “He paid the bills. All I wanted to do was to hang on to my house.”

So she let some bills go so she could pay her mortgage. Then, last year her home was damaged in a fire. After her lender took its share of the insurance proceeds to pay off the mortgage, there wasn’t enough money left to repair the home.

When Ms. Page, then a homemaker, asked about a loan to repair the house, the bank told her it wasn’t worth applying for because her credit score wasn’t high enough. She applied with other lenders but was turned down because of her credit score.

A credit score is a number that summarizes your credit risk, based on a snapshot of your credit report at a particular point in time. The score helps lenders estimate the chances that you will repay a loan. The higher your credit score, the better deal you’ll get.

As the credit markets have tightened in recent weeks, lenders have raised their standards and now are requiring higher credit scores before they’ll loan money. That’s why consumers like Ms. Page need to attack their debt.