How to Manage Your Debts

To repair your credit score, you will need to manage your daily bills responsiblyunderneath debt while finding a way to pay down your debts. The amount of debt that you owe accounts for 30% of your credit score, so you can see the importance of resolving any unpaid debt. Eliminating your debts can be very difficult, especially if there is not enough cash on hand to do so. You may want to consider a part-time job to generate extra income.

If you are confident that you can settle and negotiate your own debts with your creditors than the first thing you will need to do is gather all 3 credit reports; Transunion, Equifax, and Experian. You can also get all 3 credit reports from the website, you can check out my MyFico review here.myFICO advertisement to get FICO scores

Next, you need to get the contact information for all creditors that you are indebted to; you can usually get this from your credit reports. If any contact information is missing you can always grab that information from a Google search.

After you have collected the phone numbers and addresses of your creditors, you need to call them to see if you can settle for an agreeable settlement amount. If this cannot be accomplished, the original indebted amount will remain the same.

Be sure that if you do settle with your creditors that they commit to removing the account from your credit reports after the debt is satisfied.  Also, request that they send you a copy of the debt release letter that they submit to the credit bureaus for your records.

Depending on the settlement amount you have 3 options; make paymentdebt settlement approved arrangements, pay the balance in full, or pay what you can when you can. There are 2 very famous techniques that you can use that are quite effective; the debt snowball or the debt avalanche.

Debt Snowball

According to Investopedia the debt snowball is defined as “A method of debt repayment in which the debtor lists each of his/her debts from smallest to largest (not including the mortgage), then devotes extra money each month to paying off the smallest debt first while making only minimum monthly payments on all of the other debts.”

This method is very popular. As you pay off your debts quicker because youdebt snowball vs debt avalance are working on the smallest debts, you feel as if you are accomplishing your goals faster.

Debt Avalanche

According to Investopedia the Debt Avalanche is “A method of repaying debts in which a debtor allots enough money to make the minimum payment on each debt, then devotes any remaining debt-repayment funds to repaying the debt with the highest interest rate.”

The Debt Snowball technique works better for those that have a challenging time staying motivated; it will seem as if you are paying your debts off faster. On the other hand, the Debt Avalanche technique saves you more money because you are paying less interest on your debts although the results take longer to see.

The hardest part of managing your debt is first admitting that there is a problem and taking the necessary steps to fix it. Good luck with your debt goals and if you have any further questions or comments please feel free to ask me anything below.

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