Now that you totally know your credit standing, we now proceed to debt management. But first of all, let us clear out that being in debt is not that bad at all. It just all depends on what you used with what you owed, and if you handle your debts properly. If properly managed, debts can be taken to your advantage like better interest rates and faster loan approval. Here are some more tips to control debt efficiently.
• Check your credit report for irregularities and inaccuracy- Now that you know how credit scores are computed, it is more important to monitor and check your credit score. Under FCRA or Fair Credit Reporting Act, consumers are allowed to have a free copy of their credit report once a year. Visit annualcreditreport.com or call 877-322-8228. Check for inaccuracies and irregularities on your credit report. The FCRA allows consumers the right to dispute anything that is inaccurate on their credit report. In case of information inaccuracy, contact the credit reporting agency and the information provider or lender, in writing, about the inaccurate information they have and include copies of documents proving your claim.
• Create a debt payoff plan- Using your credit report, list down all your debts. Write it down according to balance, taking note of the interest rates (if it still has) of each debt. Since we are trying to improve credit score, it is best to pay the balances off, instead of settling the accounts. You can either try to pay off small balances to free up more money, in preparation for paying off bigger balances, or pay the accounts that still accrue interests first. Paying off debts may take more time, especially if you don’t have much money to pay it off. If you can’t zero out your balances, at least keep it low and pay on time.
• Raise more funds to pay off debt- Well, this is a tip for those who want to get out of debt faster. Of course, more income means more money that can be used to pay your debts. You can try going overtime, go on side jobs, or selling stuffs you no longer need.
• Stop incurring more debts- All these efforts of paying old debts will be useless if you’ll just get new debts. You will just end up incurring more debts. However, it is also not advisable to close of other accounts. Because one way of computing credit score is through the ratio of the total debt against the total credit limit. Thus, closing your other accounts with open credit will just make the balances appear higher.
• Inquiries and verifications by new lenders do hit your credit score. So don’t try shop around for better interest rates from different credit lenders.
• Don’t file bankruptcy. As much as possible, avoid bankruptcy. Debts declared under bankruptcy may remain on your records for as long as 10 years.
• Pay tax liens- Unpaid tax liens can hit you for 7 years even after payment.
• Too many credit cards can pull down your credit score. Unless, all of these accounts are up to date and well maintained.
• Don’t consign debts. Through consigning, you are deemed responsible for the account in the event the other party does not pay the account.
• Pay bills on time. Late payments may remain in your history for seven years.