Sometimes the necessity of credit can break your best plans regarding finances. It can be totally annoying to stop making your prime purchases like - a new home, your own vintage car, etc just because of bad credit prevents the path of loans.
In these situations, you might be thinking there is any possible way to quickly raise your credit score while getting out of pre-existent debt. Unfortunately, there are no shortcut ways to repair credit score. If you have huge debt problems, paying the only minimum will make your credit suffer. So, you need to make some strategies which may streamline your efforts, raise your credits along with getting out of the debt.
Easy strategies for saving money and reducing debts
1. Increase your income
Increasing your working hours, take a part–time or a second job to earn more, rent out your house or room or garage. you may also ask your grown-up teenagers to find part–time jobs to start a new source of income, if possible.
2. Decrease your expenses
You need to spend less on luxuries like entertainment or recreation. Skip frequently eating out outdoors at the time of lunch or dinner. Try to stretch your money while buying at the grocery store. Don’t forget to file for taxes to receive assistance with premiums or government funds. Normally these benefits are based upon income levels.
3. Sell your assets
The financial crisis doesn't come by knocking at your door. Do you have any extra vehicle that you often use for recreation? It may be a second-hand car, your bike or other possessions that you can sell out and make money for debt repayment. To overcome a financial crisis there’s nothing wrong to use your stuff to get over from it.
4. Consolidate your loans
If possible try refinancing your mortgage. Refinancing will definitely reduce the monthly mortgage installments. A consolidation loan might become handy to lower total monthly debt payments if you don’t gather any more debts until the consolidation loan is paid back in full.
5. Ask help from the creditors
You can make calls to your creditors and negotiate with them. If anyhow you can convince your creditors to lower the interest rates, it’ll be easier and quicker for you to pay debt off or go for a relief option during hard times.
6. Ask support from family or friends
You can ask financial help from your family or friends as a short time loan. If you borrow money from them, know well about the repayment option. If you can’t go for direct financial help, then you can opt for other resources like child care relief.
7. Go for settlement of a portion
Observe and examine the situation and contact your creditors. Convince them to accept your written proposal. The creditor may settle outstanding dues by accepting a reduced amount. But settling your debts may damage your credit score a bit rather than improving it.
8. Go for a debt repayment plan
Being a consumer if you have a surplus after doing your budget, and a strong will to pay off your debts in full through a credit counseling agency, a non-profit debt management program might support you.
9. Go for bankruptcy
According to your debts and your current financial situation, you may file for bankruptcy. This option might come useful when you have nothing to pay your debts off. This legal remedy for debt can be done through a trustee, who is licensed through the Bankruptcy and Insolvency Act.
10. Make proper strategy for making payments
Make a list of your debts from the lowest balance to the highest one. You can add up all the balances and distribute a certain amount for making each payment and distribute them. This way you can pay off the balances easily and faster. You need to pay off the lowest balances first as soon as possible.
11. Go for balance transfer
The best solution for your credit card debts is a balance transfer credit card. If you qualify for this card, you may transfer your current debts to another low-interest card, or you may also transfer the balances into a 0% interest card for a specific time period. By this way, the total big interest will be divided into multiple cards, and that’ll lower your overall monthly payments. The more money you save, the more easily and quickly you can repay your debts while building your credit score.
Now, you know how to kick out debts, now it is time for improving your credit scores :
1. Pay your bills timely
It is obvious that late payments are one of the most, prime negative reason that reflects on consumer’s credit reports and are often responsible for major drops in their scores. At the time of making monthly payments of loans and credit card dues, it's important that consumers need to pay the minimum balance on time each month without fail.
Making continuous late payments or defaulting on loans will heavily damage your credit score that will be reflected in your credit report up to seven years.
2. Keep credit card balances low
If you have a due credit balance that is equal to 35% or more of your available credit limit, it will actually damage your score. It will happen even if you pay all your dues on time and always pay more than the minimum balance. If you have a $20,000 credit limit on a credit card, you may need to maintain your credit balances lower than $7000, and also need to make payments on time. More than the minimum balance.
3. Keep old unused credit accounts
Maintaining old credit accounts for a long time actually helps to build a good score. It will also establish a goodwill with each creditor. You may be rewarded for maintaining a good, long-term credit history with each creditor. The longer you maintain your old accounts in a good, positive manner, your credit history will also show a positive statement of your credits.
4. Apply for new credit when it's really needed
Applying a too much new line of credit can hurt your credit score. Don’t get lured by the discounts offered by the retail stores. If you’re going to make a large purchase and want to get a retailer’s credit card, make sure you must read the fine print. Determine what your interest rate will be and what fees are associated with the card.