Credit And Debt Management

Make a list of all the debts you owe, as Ric Edelman, author of "The Truth About Money," recommends. Write the lender, the amount, the interest rate, and the minimum payment. Total up the debts and the minimum payments. To get out of debt faster, you will need to pay more than the minimum on one debt at a time.

Budget for a surplus to retire your debts. Don't upgrade your lifestyle too much even if you have a full-time job. Remember, you have only your net income, not the gross, for both living expenses and debt repayment. Earmark at least several hundred dollars a month for debt repayment, depending on the size of your debt.

If you are married, work with your spouse to create a plan that allows you to pay more than the total minimum every month. Pay cash for your purchases. Don't run up more debts, or you will only be digging yourself in deeper. In "Making the Most of Your Money Now", Jane Bryant Quinn writes that this rule is crucial to debt reduction. Transfer loans to save on interest.

According to Quinn, if you can transfer credit card balances to a new card with a lower rate, you should. Find new cards with low rates, or call the banks and ask for better rates. Consolidate your government loans for convenience and interest-rate protection. Quinn suggests that if you consolidate, you choose the fastest repayment plan in order to force yourself to repay quickly. You won't incur a penalty for paying still faster, she says. According to Federal Direct Consolidation Loans, you can also convert variable interest rate loans to fixed-rate loans, protecting yourself from possible interest rate increases.

Put your extra money towards your highest rate debt until it is paid off, as Jane Bryant Quinn recommends. Your highest rate debt is probably credit card debt. Continue making the minimum payments on your other debt. Work off your government loans. Put your extra money on the highest rate loan remaining once your credit cards are paid off. If you get pay increases, bonuses or overtime, put that money toward debt payoff. Just make sure no prepayment penalty exists for any loans you pay early. Continue until you have paid off all your loans. Then you will have the financial freedom to pursue your other dreams.

Appearing for credit counseling is considered as a positive trait and the credit counseling references are removed from the credit report, once you are free of debt. This means there are no long-lasting entries of your debts, in your credit history. A survey conducted by FICO reveals that the people who approach a professional credit counselor for help, have been able to repay the credit, without defaulting or filing for bankruptcy.

Prior to approaching a credit counseling agency, check out the authenticity and the credibility of the counseling firms. Do not pay the credit-counseling firms, unless your contract with them is over. A credit-counseling firm would have to give you a written statement about their terms and conditions and also the services offered by them.

Filing for a bankruptcy should be your last resort. Do it only if you are badly in debt and have many black marks on your credit. When you file for bankruptcy, you could lose 200 points. This would affect the credit score if you have a score above 650. However, if you have multiple delinquencies and lapses in your credit report and if you have score below 620, it would not affect you much.

When you file for bankruptcy, the credit score will fall below 620 and obtaining credit with a favorable rate would become difficult. In short, the credit would become more expensive. You would also need to understand, the credit report becomes blemished for next ten years. Do not hesitate to meet a good and reputed credit counselor once you know you have a poor credit score and you are not in a financial position to repair it. Remember, if a credit counselor asks you to file for a bankruptcy, take time out to cross-check with another credit counselor.

Many of the profit-making agencies would be keen on filing for bankruptcy than on helping you to apply for debt consolidation loan. To sum up, take into consideration the points given above while trying to improve your credit score. Credit score can be improved if you are organized and disciplined enough to follow a stringent repayment plan.

1,000 from your non-essential expenditures and bring your household expenses back into balance. Budget your way out of debt and into a healthier financial status. Brian Hill is the author of several nonfiction books. He contributes to several websites on the subjects of how to reduce credit card debt and get out of debt now.