All you have to do is manage your finance well so that you can get rid of your debt and improve your credit score at the same time. Having failed to pay off your debt will affect your credit score that will disrupt your financial health, personal relations and your overall health as well. Therefore, it is unwise to delay your debts payments as it will do more harm than good.
There are a lot of ways in which you can pay off your debt. If you handle your finance well and follow the specific steps precisely then it will not take you long to get rid of it. The good news is that debts do not last forever if you are diligent with your payments in each month.
You must not sulk over your bad credit and stop paying your current debts as that will affect your credit history even more badly. You must know that over a period of seven to ten years your bad credit can eventually become a good one if you keep on paying your current debts on time.
Even the banks and other financial institutions purge delinquent accounts automatically after seven years provided that there are no discrepancies in it. Therefore, you must first know the age of your debt to manage your finance as well as your bad credit.
Dealing with old debts
The best way to improve your credit score is to get rid of your old as well as your current debts. Now this may sound very difficult as that will come up to a huge sum of money every month.
- However, if you prioritize your debts and start paying the highest and the oldest ones first while continue paying the minimum amount due on the others might ease up your finance a bit.
- Always make sure that you stay updated with your credit score. Ideally, you can get your score downloaded and print it once in a year but there are a few credit reporting agencies that will provide you with a score card twice a year. Make sure that you choose such agencies wisely so that you get to see your score on a regular basis.
Getting multiple credit scores will also help you see it by yourself whether or not all entries are identical. If not it will give you a scope of imagining that there might be errors in it as well. having an updated credit score in hand will also help you to formulate a better plan and make amendments in your existing one to arrange for the money required every month to repay your debts, old as well as new.
Size does not matter
The size of your debt does not matter and not the number of debts that you currently have. This is because you can always consolidate your debts into one single debt that will have lower monthly interest and also a longer tenure. This will provide you with the much required breather that you want to manage your debts.
- However, you may also opt for debt settlement if you want but it is recommended that you read the debt settlement reviews prior to that. In this process you do not consolidate your debts but discuss with your creditor whether you can offer a lump sum for your debt and how much they can waive from your outstanding balance. However, the creditor may or may not agree to your offer which is why consulting with a credit counselor to know about the feasibility of such option before you sit on the negotiation table.
- Small or big, all debts should be managed strategically. This will help you to keep it within manageable limits and avoid penal charges and overdue for non-payment for even a single month. Therefore, have proper plans as well as a fund every month so that you can continue to make the payments and avoid find yourself in the spiraling debt trap. It will be hard to come out of it if you fall into it.
- Follow a monthly repayment calendar for paying your monthly bills on a regular basis. This is the most significant aspect of effective debt management. This calendar will help you to know where exactly you stand, when to make the payments for each of your debts and how much money is required on each specific date. This will prevent the chances of any payment exceeding the due date.
- The calendar will also help you to prioritize your debts and also know the payments that you have made against each. Just make sure that in the calendar you write down the check details against the specific date of each month.
- It is prudent to make arrangements for your debt payments long before the due date. Therefore, calculate the amount you need and create a fund each month using it for your debt payments only. You may create a separate savings account and even ask the bank to debit the amount for each debt on the specific day. This will even reinforce that you will never miss on any payment and all will be made within or even before the due date.
- Eliminating the chances of interest and overdue added to your loan account is primarily important. This will prevent debt accumulation and becoming unmanageable in the end. If you have both good and damaged loan accounts then your primary focus should be on the good accounts. Paying these off on time will help you a lot in rectifying your bad credit by a significant extent.
- When there is a scarcity of funds, you should not hurt the good accounts for those damaged debts that have already affected your credit score adversely. This will prevent any further damage to your credit score.
If you follow these steps then you will not have to worry about those collection calls and take it reluctantly. Therefore, always have a list of all your debts no matter whatever is the number and mount and make a plan after consultation with a credit counselor.