The Ultimate: 6 Tips To Get Out of Debt Fast

ID-10053900Debt generally refers to something owned by one party, the borrower or debtor, to a second party, the lender or creditor. Behavioral economist Meir Statman, recently said, “getting out of debt is the financial equivalent of trying to quit smoking.”

Just like any bad habit, good intentions alone will not be enough. To ensure success, we need to break our underlying patterns of behavior.

How is it we live in the richest most powerful country in the world, but the average American is more than $11,000 in debt. Our European friends who live by a mainly debit card system have an average savings of $13,000.

1.Plastic Surgery

If we are serious about paying off our balances. We don’t have to literally cut up our credit cards, just stop using them routinely. We should go green for our everyday spending.

Try carrying around a set amount of cash to use each week. We make better purchasing decisions when we actually have to hand over the green stuff plus there’s a preset spending limit.

When we run out of money, we stop spending it’s that simple. When the only way to purchase is plastic, buying online for instance, then use your debit card. Your debit card can also be used as an emergency substitute for cash should you run out.

2.Leave Those Cards Home

The best way to ensure that you enforce the cooling off period on new credit purchases is by taking the cards out of your wallet.

You should store them in a place that’s not easily accessible and safe. Do not let others know where you have hidden them.

3.Close The Accounts No Longer Needed

Having unused credit available from lenders with whom you’ve had a long relationship will help boost your credit score.Having too many will harm your credit score. As a rule, 3 credit cards is what works best and try to never spend more than 50% of the available credit on any of the cards. This will keep your score at it’s highest.

You should also consider closing all your store cards if you need to make a purchase then use your credit card and pay it off at the end of the month.

4.Lowering Your Interest Rates

Start by reducing what you pay in interest. We can start by calling our current credit card companies and explaining that we intend to transfer our balance to another issuer unless our interest rate is lowered.

Almost all credit card companies run promotional programs with low or 0% interest. They will be willing to put you on one of those rather than risk losing your business. All you need to do is ASK.

5.Tackling Those Credit Card Balances

Finally, we need to develop a strategy for paying off our existing credit card balances.Gather all your credit card statements together and make a simple table listing the entire amount you owe, and the minimum payment and interest rate for each card.This will help us determine the order in which we should pay off our cards.

We need to focus on the highest interest rate cards first and pay off as much as you can each month while making only the minimum payments on our other cards.When the first card is paid off, use the same strategy on the next-highest interest rate card and so on until you’re debt-free.

6.Late Payments

Are the number one cardinal sin of debt management. You get hit with hefty late fees and very high penalty rates that can go to 30%, plus of course, your credit score will take a big hit.We all have a responsibility to improve our financial literacy and develop the required skills and practices for effective financial management.

There is a real need to get away from the “Someday things will get better in my life” or the “Someday I will be able to earn enough money to stop worrying about the bills.There is a lot more to life than that, but it has to be said and understood that the only person that can change your life is YOU.

There is NO substitute for Action! With Action, you will overcome your fears and hesitations and accomplish everything you set out to do and more.

17 Proven Ways To Increase Your Credit Score Quickly

ID-10079683Unless you’re able to pay for all of your expenses with cash, your credit score will determine what type of loan and interest rate you will qualify for when it comes to your expenses. Your mortgage, car loans and credit cards are all determined by your credit score.

The higher your score, the more likely the bank will be to trust you on repaying the loan. Your credit score can also affect your ability to get a job, find an apartment, or even get insurance. They are used more than most people realize.

Your credit score will determine whether you will get approved for credit cards, auto loans, mortgages, or other loans, as well as impact the interest rate you’ll pay. If you aren’t happy with where your credit score is today, take heart:

Of course, the best way to maintain a high credit score is to pay all of your bills on time and have a low debt-to-income ratio at all times. Assuming you’re doing that and you have no huge red flags, such as a bankruptcy, here are several other ways in which you can increase your credit score in as little as just a few months.

1.Maintain accounts in your own name:

If you’re a college student still spending mom and dad’s money, or you’re an unemployed spouse with accounts in your partner’s name, it’s time to set up some accounts in your own name. That will give you the chance to build your own credit history. Most accounts with monthly bills, including for utilities or credit, can help fill out your credit history.

2.Don’t become a victim.

Credit scores can be ruined quickly if a thief steals your identity and starts creating new accounts and building up debt in your name. To reduce the chances of becoming a victim, review your account statements carefully each month to spot any errors and alert your card issuer if you see any problems.

Avoid sharing personal details on social media that would make it easier for someone to hack into your accounts, too, and use hard-to-guess passwords on financial accounts.

3.Ask to have items removed

Maybe you made a late payment on your mortgage two years ago or perhaps you stopped making payments on your MasterCard because your income went down last year. We’ve all had rough periods in our life and that doesn’t make you a bad person.

Call the creditor and ask if there’s anything that can be done to have that “blip” removed from your report. You may have to pay the balance in full or write a letter explaining what happened, but if it works, your credit score will be instantly boosted and there is absolutely no harm in trying.

Once your credit score is where it needs to be, you have to continue working to maintain your high score. Keep your debt down, automate your payments so you won’t miss any and pay off your credit cards in full every month. Also, pull your credit report on a yearly basis.

4.Be patient.

If you have a major black mark on your credit card if you’ve filed for bankruptcy, for example – it will take time to put some space between that event and your score. In most cases, it takes about seven to 10 years to erase the negative effects of a bankruptcy filing from a credit report.

5.Pay off debt.

If you’ve already tried to make the denominator of your credit utilization ratio bigger, it’s time to focus on making the numerator smaller. Paying off debt is the best way to do that. By lowering your total balance owed, you lower the total amount of interest you pay, and improve your credit score at the same time.

6.Sign Up for a New Credit Card

If you’ve got a lot of credit card debt, getting another credit card may not be the wisest thing to do. But if you need to raise your credit score quickly, this may be your only option. If you can, try to get a card with a 0% intro balance option, which will allow you to transfer your existing debt over and at least get a break from paying interest each monthID-100333659

7.Keep Cards Open

You should not close any existing accounts, as each one continues to contribute to your credit history. In fact, many people hold the mistaken belief that closing credit card accounts will help their credit score, when it will likely have the opposite effect.

The longer you’ve had your accounts, the more it adds your score. Even if you’re no longer using your old credit cards, you can cut up the cards or lock them away, but don’t cancel them.

If you have multiple cards from one issuer, consider consolidating the newer cards into the older cards. You can do this by calling customer service and asking if they offer this, but only do it if they keep the total credit limit the same.

The goal of this move is to increase the average age of your revolving lines of credit without reducing your total credit limit, which will affect your credit utilization ratio.

8.Have your credit limits increased

After you’ve paid down as much debt as possible, call your credit card companies and ask if they can raise your limit. This increases your total available credit and reduces the percentage of debt to available debt that you have, which looks good to lenders. A fair warning – do not increase your spending to go along with this higher credit limit.

9.Take an in-depth look at your credit reports

Pull your credit reports from the three national credit bureaus – Equifax, Experian and TransUnion. Make sure everything is accurate and if it’s not, get it taken care of immediately.

Typically, accounts that are in collections remain on your credit report for seven years, so if it’s been longer than that and you still see those items being reported, make sure to call and have it removed. You can get your credit reports every year for free or you can just use a service like Credit Sesame.

10.Budgets

Everyone has been told that budgets are helpful, but this is especially true for people trying to repair their credit. Having separate funds for daily expenses and debt can make managing your money a lot easier.

11.Set Up Alerts

Many credit card issuers let you set up email alerts related to your spending. If yours does, set it so you get an email when your balance reaches 20% of the card’s credit limit. Once you get that email, you can start using another card or pay down the balance before charging more.

12.Avoid expensive credit repair companies

You may see adverts from firms that claim to repair your credit rating. Most simply negotiate with any companies that have sought County Court Judgments (or decrees in Scotland) against you.

Others claim they can do things that – legally – they can’t, and some may even encourage you to lie to the credit reference agencies. Don’t even consider using such firms.

There’s no reason you can’t improve your credit rating yourself so there’s no point paying someone else to do it.

13.Be responsible.

Making your loan or credit payments contributes 35 to your credit score, according to FICO. Delinquent payments, even those that are just a day or two late, can seriously harm your score. Be careful of the balance you rack up every month.

Big balances can harm your credit score, even if you pay them off. MSN advises that you charge between 10 and 30 percent of a card’s limit each month and pay it off in full to increase your score. You can also read Tom Corson-Knowles book titled 33 ways to raise your credit score.ID-10029069

14.Strike a balance between paper and plastic.

Having a record of on-time payments for both revolving accounts and installment loans should help your credit score. In fact, having a mix of credit types on your credit report is normal for people with longer credit histories and can add slightly to their scores.

However, you need to make sure you’re striking a balance as to how you pay these off. If you have only an installment loan (for example, a car loan) and then pay cash for everything else, you might actually be hurting your credit score. That’s because having and using a credit card responsibly can convey prudent money management—which in turn can boost your credit score. But, if you need the discipline of using paper over plastic to keep your debt in check, do so.

15.Become an Authorized User

Ask a friend or family member to add you to one of their older credit cards as an authorized user. The older your credit history, the better. If your mother agrees to put you as an authorized user on a card that she has had for 20 years, you could see your score increase dramatically.

And with the authorized user plan, you don’t even have to have the card in your possession.

16.Make more than the minimum payment.

If you make only the minimum payment on your credit card each month, it may take longer than you think to pay off your balance. For instance, say you have a balance of $1.500 on your credit card with the modest interest rate of 14.99% and make $100 in new charges each month.

If you pay a minimum of $125 per month, it will take you more than 10 years to pay off your credit card debt. Increasing your monthly payment to $174 per month means you can pay off that debt in 2years and save hundreds in interest charges.

An Accredited Financial Counselor with an MBA, Angel Love also made some points known in her book titled  Raise Your Credit Score In 10 Easy Steps!

17. Correcting errors on your credit report should boost your score immediately;

Paying down balances takes a little longer to work (depending on how much you pay off and how often your lender reports to credit bureaus), so you may see results in a few weeks or a few months;

Paying off delinquent accounts gives you some leverage with lenders, but improvement in your actual credit score will be slow, so be patient.

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Understanding How Credit Works

how credit works

Understanding how credit works is extremely important in order to acquire and maintain access to credit, one must have a working understanding of how credit works  namely, how credit scores are established and tracked by the three major credit bureaus.

Inquiry Myths

As discussed in “The Larry Rule,” people who repetitively apply for credit are viewed with suspicion by the credit agencies. However, there are some caveats to the Larry Rule.

First, multiple inquiries for the same purpose – shopping for the best deal on a home loan, for example – count as just one inquiry.

Secondly, it is never harmful for you to check your own credit report – only applications for credit (not mere inquiries) count against you.

Third, and most importantly, inquiry data is only kept on file for six months. So in other words, the Larry Rule has a six-month statute of limitations.

The exceptions to the Larry Rule outlined above are all good news for consumers. Unfortunately, not everything contained in this article is so pleasant. For example, you may believe that your permission must be given in order for someone to check your credit. Unfortunately, this is a myth, except where it applies to employers.

A potential creditor, an insurance company, a landlord, or virtually anyone else can access your credit report without your permission.

Credit Repair Myths

Many people believe that paying off debts immediately improves their credit score. Unfortunately, this one of many credit repair myths. While a paid debt is marginally preferable to an unpaid liability, the truth is that missed payments and past delinquencies are still ugly marks on your credit report, and simply paying off an old debt may not improve your credit score by even one point.

The good news is that late payment and old delinquency information will disappear after seven years. But the idea that all negative information is wiped out after seven years is another credit repair myth.

The truth is that Chapter 7 bankruptcy stays on your record for 10 years, and unpaid judgments can potentially remain on your credit report forever.

Another popular myth is that the act of closing your credit cards is good for your credit score. This myth is perhaps the most painful, as many people who close open accounts have difficulty opening new ones in the future.

The truth is that open, active, and up-to-date accounts help your credit. Unused credit capacity (i.e. available credit) is a positive factor in determining your credit score.

Credit Counseling Myths

Credit counselors and debt management services have received a bad name over the years, and much of the negative publicity has been deserved. It is, for example, a myth that you can simply pay a company to “fix your credit.” Any firm that claims to perform this hands-off service should be avoided.

But there are good, reputable credit counseling and debt management services who truly do help people. And despite the myth that using such a service inevitably hurts your credit, the truth is that many of these companies are able to reduce their clients’ debts and maintain or improve their credit scores at the same time.

When considering a credit counselor, look for firms that have these dual goals, not companies that focus solely lowering your liabilities.