Emptying the Debt Recycle Bin & Freeing Your Credit
Credit card debt is undoubtedly the worst kind of debt of all. Every time you make a payment to your credit card company, you’re paying for something you’ve already used, and in many cases something you’ve discarded. Having a strategy will keep you straight when things get tough. A great way to approach your credit card debt is to pay your smallest balance first, then go for the next smallest, and so on and so forth. This will keep you moving forward toward a debt-free future.
Being in debt inhibits people from making standard purchases such as buying a vehicle. However, former buy here pay here at DriveTime dealerships offer auto loans for those with bad debt. As long as you pay the loans back in a timely fashion, auto loans can help you reestablish your credit score. Once your score improves, you won’t be subject to the oppressive interest rates that prevent you from fully paying off your debts.
Rid Credit Report of Old Debt
Your first step in eliminating your credit debt is to order your three credit reports, which you can do for free at Annualcreditreport.com. Look for anything that doesn’t belong. Five percent of credit reports had significant errors capable of damaging credit scores, according to a Federal Trade Commission study released in 2013. Scan your report carefully for any payments that are incorrectly noted as late as well as collection accounts that don’t truly apply. These errors can often be remedied by filing a dispute with the credit bureau, which can be done online.
Make the Cut
Life is expensive these days, and you need to cut corners wherever you can. Call your cable provider and see if you can get a better rate; if not, threaten to move to a competitor. Cancel premium services you don’t need, such as streaming video or satellite radio. Pack lunch every day instead of eating out. You’ll be surprised at how much you can save without compromising your quality of life, and you’ll have that much money to use to pay your credit cards. Better yet, since you will need less money to live, you won’t have to rely on credit to get by, which is the real key to eliminating credit card debt.
Balance Transfers & Debt Consolidation
One way to catch up on your bills—and get rid of credit card debt in the process—is to take advantage of balance transfers, U.S. News reports. Many new credit cards offer introductory periods in which no finance charges are applied by the creditor, enabling you to transfer high interest card debt to a new card and have a much easier time attacking your balance. The caveat, of course, is that if you don’t pay off your debt during this introductory period you’ll be in the same boat you were once in. An alternative is to take out a debt consolidation loan, which is a similar idea but is executed a little differently. You’ll likely get a better interest rate on a consolidation loan than you’re currently paying, but you won’t get zero percent financing. You’ll also have only one payment to worry about each month instead of several.
The problem with both of these methods is that you’re not reducing your debt. You’re simply exchanging one form of debt for another. If you can make the necessary changes and avoid using your cards after you consolidate, then you’re in great shape. However, there’s also a chance that you’ll rack up your newly paid cards, leaving you with double the debt. Make sure you can handle the ramifications of balance transfers before you go this route.
Reduce Your Temptations
If you don’t know something is on sale, you won’t be tempted to buy it. Cancel any catalogs you don’t absolutely need, and avoid advertisements for frivolous goods. Even if you didn’t get into debt as a result of impulse purchases, you must still be on guard for unwanted messages, as they can get in the way of your mission.
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Category: Credit Cards, Debt
