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Dealing with Debt and Credit Problems

April 04, 2020

Dealing with Debt and Credit Problems

Financial goals are no different than any other life objective you might have.  The best chances of success are when your goals are clear and specific.  Financial decisions with measurable and attainable steps are more achievable than vague, general resolutions.  For example, you’re more likely to succeed when you announce, “I’m planning to pay off my credit card debt by the end of year,” than simply saying, “I’m going to do better with my finances.” 

Raising Your Credit Score

Like any major change in life, raising your credit score will take time. The following tips will help you get on the right track to increasing your credit score:

  • No quick fixes- Beware of strategies that instantly raise your credit score. The best method is slow and steady improvement.  Being responsible over a long period of time provides the biggest payoff.
  • Check for errors- Regularly check your credit report for any errors or late payments. Convey any discrepancies to the credit bureau. 
  • Make payments- Create a bill payment method, either manually or by enrolling in automatic bank withdrawals. If making your own bill payments, be sure to pay on time to avoid late fees.  Be mindful that many automatic payment methods will only deduct the minimum amount.  It’s wise to pay as much as possible on your credit card balance. 
  • Stop credit cards- Tackle your credit card debt and avoid using credit if possible. Pay your highest interest cards first, while making the minimum payments on your remaining cards.  Don’t close your accounts once you’ve paid off the cards, as this is a short-term solution for raising your credit score.  
  • See a credit counselor- If you’re having financial trouble, consider talking with a professional. Do your research to ensure they’re a legitimate financial counselor and not taking advantage of you or your situation. 
  • Avoid new accounts- Opening a new credit line won’t raise your score. Do this sparingly and only as needed. 

Tackling Debt

There’s no shortage of information available about paying off debt.  These strategies offer ways to minimize your liabilities:

  • Record debts- Make a list of all your liabilities, or debts, and exactly how much you owe. If you’re unable to find the balance, contact your lender.  Write down what your minimum payments are as well. 
  • Trim expenses- Find extra money in your budget by eliminating unnecessary expenses and spending. Check your monthly bank account statement to know where your money is going.  Then, pick a few expenditures to consider reducing or removing.  Some ideas are:
    • Borrow books or movies from the library instead of purchasing or renting them.
    • Exercise at home or outside rather than paying for a gym membership. There are a variety of apps for your mobile device with workout programs and personal training information.
    • Cancel magazine or newspaper subscriptions you’re no longer using.
    • Consider packing your lunch at home or making your own coffee instead of paying your local barista.
  • Bill savings- Look for cost-saving opportunities through your insurance company, phone provider, and credit card accounts. Many businesses have lower rates available or discounts for paying in full.  A little time invested to “shop around” for utilities and other bills can really pay off. 
  • Reduce debt- There are several ways to tackle your debt. Financial experts suggest different methods.
    • Highest interest rate- One strategy is to pick your highest rate credit card. Put all your financial weight on that, keeping minimum payments on all your remaining debts. 
    • Smallest debt- Another debt-reduction plan is to focus on the smallest debt. Tackling the smallest debt builds your financial momentum.  Add the amount used on the previous debt to the next one and so on.  This technique is known as “snowballing.” 
  • Reward yourself- Once you’ve eliminated your debt, treat yourself to a reward or gift. Print out a reminder, picture, or inspirational quote to visualize your success.  Hang it on your refrigerator or office wall to provide daily motivation.
  • Find extra income- Look for any way to bring in some additional cash flow. Could you pick up a part-time job or do some freelance work?  Tutoring or delivery services are options too. 
  • Check statements- Avoiding bills or bank statements because you’re afraid of the balance won’t get you closer to your financial goals. Ignoring creditors’ calls also makes you vulnerable to lawsuits.  Instead, be courageous and educate yourself about your spending habits.  Take advantage of the online tools and mobile apps to help track your expenses. 

When dealing with debt and credit problems, it’s important to start small.  Chances are, your debt accumulated over time.  Likewise, changing your financial future won’t be a quick fix.  As you begin to see success in a few areas, it will build your momentum.  A little forward progress might be just the push needed to change your habits and reach your financial goals.   

 

Want to talk to a counselor today about this? 

Call Amplified Life at 800-453-7733 and ask for your “Free 15 Minute Phone Consultation" with one of our licensed counselors. We’ll listen, answer questions you may have, and help you plan next steps.

 

Sources:

http://www.myfico.com/crediteducation/improveyourscore.aspx https://www.mint.com/blog/goals/the-debt-destroyer-menthod-tackling-your-debts-one-by-one-0113/

 




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