How to Repair Your Credit and Get Out of Debt
Credit is so important nowadays. It is vital to everyone to keep control of his or her debt. However, this doesn't mean much once you are already in debt. Therefore, you need a guide to help you get out of debt and repair your credit. Here is how you can do it.
Check Your Credit History
The first thing I did when I started my investigation into my credit was check my credit history. To do this I had to go to the credit bureaus. There are three of them.
These three bureaus are obligated to give you one free credit report a year.
Mistakes - Once you get your report, you need to go over it thoroughly and look for mistakes. You will be surprised just how many mistakes might be on that report.
Challenge Problems - Also, look for accounts that have passed statutes of limitations for your state. These kinds of things can be taken off your credit report immediately. Challenge anything on your report you don't agree with.
Building Your Credit
Next step I took was to start building credit. Credit scores are based on paying on time. So, obviously, you want to start paying in a timely manner. If you cannot because your money is spread out paying on too many loans then try to consolidate. You can even negotiate lower payments most the time this way. Remember paying on time adds points to your credit scores.
Next save money, live simplistic, live like an adult. Get a credit card not to buy large luxurious items, but small things and pay it off immediately. This shows you can be trusted and you earn points this way.
Pay Down Cards
If you have credit cards, paying the minimum balance will get you nowhere fast. Look at your bills and find the lowest amount owed. Pay as much as you can afford on that one and only pay the minimum on the others. When the lowest one gets paid off, take that money and put it towards the next lowest card. Do this until they are all paid off.
It works like this.
Pay off Card A:
Since you can only spend $250, you need to pay the minimum of Card B and C. This is $170. That leaves you with $80 to pay on card A. ($250-$170). After four months of paying $80 on card A it is paid off. GREAT!
Pay off Card B:
You still have $250 you can pay on credit cards. Therefore, pay the minimum of $120 on Card C. This leaves you $130($250-$120). After another four months you have paid off Card B.
Pay off Card C:
Now you can pay the entire $250 each month towards Card C. In five months, it will be paid off. This means you paid off all three cards and $2,000 in debt in under a year.
Check Your Credit History
The first thing I did when I started my investigation into my credit was check my credit history. To do this I had to go to the credit bureaus. There are three of them.
- * Equifax,
- * Experian, and
- * TransUnion
These three bureaus are obligated to give you one free credit report a year.
Mistakes - Once you get your report, you need to go over it thoroughly and look for mistakes. You will be surprised just how many mistakes might be on that report.
Challenge Problems - Also, look for accounts that have passed statutes of limitations for your state. These kinds of things can be taken off your credit report immediately. Challenge anything on your report you don't agree with.
Building Your Credit
Next step I took was to start building credit. Credit scores are based on paying on time. So, obviously, you want to start paying in a timely manner. If you cannot because your money is spread out paying on too many loans then try to consolidate. You can even negotiate lower payments most the time this way. Remember paying on time adds points to your credit scores.
Next save money, live simplistic, live like an adult. Get a credit card not to buy large luxurious items, but small things and pay it off immediately. This shows you can be trusted and you earn points this way.
Pay Down Cards
If you have credit cards, paying the minimum balance will get you nowhere fast. Look at your bills and find the lowest amount owed. Pay as much as you can afford on that one and only pay the minimum on the others. When the lowest one gets paid off, take that money and put it towards the next lowest card. Do this until they are all paid off.
It works like this.
- · Card A has a balance of $300 with a Minimum payment of $30
- · Card B has a balance of $500 with a Minimum payment of $50
- · Card C has a balance of $1,200 with a Minimum payment of $120
- · You can afford to pay $250 a month on credit cards.
Pay off Card A:
Since you can only spend $250, you need to pay the minimum of Card B and C. This is $170. That leaves you with $80 to pay on card A. ($250-$170). After four months of paying $80 on card A it is paid off. GREAT!
Pay off Card B:
You still have $250 you can pay on credit cards. Therefore, pay the minimum of $120 on Card C. This leaves you $130($250-$120). After another four months you have paid off Card B.
Pay off Card C:
Now you can pay the entire $250 each month towards Card C. In five months, it will be paid off. This means you paid off all three cards and $2,000 in debt in under a year.
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