Managing Debt Without Damaging Your Credit Report

| December 8, 2013

Managing DebtIn the current economic environment, there seems to be more debt relief strategies than techniques to get into debt in the first place. Negotiating yourself out of credit card debt has become a tactical skill with a twofold goal: ultimate debt settlement is, of course, the core aim, but it needs to be done in a way that leaves your credit score intact. When it comes to credit card debt, even those who have the liquidity to pay off their principle amount need to plan a step by step process that makes mathematical sense.

Avoiding Temptation

The most important first step towards financial freedom entails keeping yourself out of future debt. This is less than simple in today’s world of cash back offers and loyalty points. These bells and whistles come at a price. Every swipe of your card brings interest, so if you have found yourself buried in debt, restrict yourself to virtual wallets, debit cards and cash until you have paid off your cards. In some cases, it may be necessary to break old habits.

By tracking your history with credit card spending, you can use a targeted approach to cutting back while maintaining awareness of your financial weaknesses. Some struggle with overheads that are too high for their incomes while others tend to spend thoughtlessly on luxuries. It is also helpful to note the dates of your expenditure, paying attention to steady increases or end-of-month crises.

Finding a Tiered Solution

There are several tactics that attack debt from one angle. The snowball approach would have you paying off your smallest debts first while customer advocates negotiate longer repayment terms and lower fees. Ultimately, your strategy should be multifaceted. Consolidation, a reduction in overheads, the creation of a savings plan and a tight budget should all play a role in your technique. This holistic approach alleviates your current debt without harming your credit score. It targets your approach to debt proactively to help you to build an improved report in the future.

Using Advocates

If your finances are in enough disarray, no solitary strategy will help. If bankruptcy seems imminent, debt relief FAQs may be the only sensible approach. Reputable relief agencies will negotiate reduced interest that do not damage credit scores but, according to Forbes, not all are equal. Some agencies push interest rates down to such an extent that the principle amount takes many years to pay off, damaging credit reports. It is thus crucial to approach agencies that are well-referenced or affiliated with a consumer standards authority.

Shifting Revolving Debt

Revolving credit, when kept current, is a powerful motivator for high credit scores. While high interest accounts with large outstanding amounts can have negative impacts on your score, keeping a few credit cards current will push your score up. If you can afford to pay off the monthly payments every month, maintaining them well will ultimately place you in good standing. Staying with the top global credit providers, such as Visa and Mastercard, is even more influential on your report. With many lenders pushing up their minimum scores, borrowers need to work even harder to become creditworthy.

Image credits : adamr




Category: Debt

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