Tag: Credit Card

7 Steps To Escaping Credit Card Debt

My blog focuses on Financial Literacy/Money. While they can be helpful, credit card usage can cause havoc on the financial health of the user. The following contributed post is entitled, 7 Steps To Escaping Credit Card Debt.

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Feeling overwhelmed by credit card debt? You are not alone. Credit card debt is one of the most common types of debt and it can quickly build up. The good news is that, even in extreme cases, there are many ways to successfully tackle credit card debt and regain financial control. Below are 7 steps that could be worth following to help you escape credit card debt.

Create a budget

The first step to helping you pay off your credit card debts should be to create a monthly budget if you don’t already have one. Work out how much you can afford to spend each month so that you’re able to pay your bills. Be prepared to make some cutbacks – this could include getting rid of unnecessary subscriptions, spending less on food/drinks and exploring more free social activities.

Minimize borrowing

Continuing to use your credit card will only add to your debts. Try to avoid any form of borrowing – use your debit card for all payments and avoid taking on extra loans or payment plans unless they’re absolutely necessary.

Consider debt consolidation

Maxed out multiple cards? Have other debts that you’re struggling to pay off? Taking out a debt consolidation loan could be one exception where taking out an extra loan has benefits – this is a large loan that is used to pay off multiple debts at once, turning multiple debt payments into one single monthly debt payment that is easier to keep track of. Just be wary that this could mean paying more interest in the long run.

Use the snowball method

Another way to tackle debts is to use the snowball method. This involves paying off the smallest debts first and working your way up to the largest debts. In the cases of credit cards on multiple cards, this could involve throwing everything you’ve got at the smallest credit card debts first. You can focus on the larger debts first, but this means having to juggle multiple debts for longer.

Talk to your creditors

Ignoring those phone calls and texts won’t make your debts go away. Get in contact with your creditors and see if you can arrange a method of paying back your debts. This could include paying off small amounts each week. In some cases, you may even be able to negotiate a way of reducing your debts such as reducing interest or even writing off some of your debt if it’s very large. Debt advisors can help you with this.

Explore new income streams

Extra income streams could help you to throw more money at your debts and pay them off quickly. It could also allow you some extra disposable income to spend on yourself so that you’re not having to make major cutbacks for months on end. A few ways to make extra income could include starting a side hustle, selling your clutter or asking your employer for extra hours/ a pay rise.

Get legal help if needed

If you find yourself in a situation where your debt feels unmanageable, there is always still the option of legal support. A debt relief attorney can provide guidance and help negotiate with creditors on your behalf. If last resort options like bankruptcy are necessary, a debt relief attorney may even be able to help you explore these and minimize future financial damage.

Conclusion

Escaping credit card debt often isn’t easy, but it is achievable with the right amount of determination and discipline. Stay positive, focus on the end goal and celebrate your progress along the way.

Credit Invisibles: How to Build Your Credit Profile

Two of the focuses of my blog are Financial Literacy/Money and Business/Entrepreneurship. There are many people who don’t understand credit. While letting something like credit card debt get out of control can be damaging to one’s personal finances, it’s important to obtain and maintain a solid credit profile. It has implications for your personal finances and ability to start a business if you have entrepreneurial aspirations. The following contributed is entitled, Credit Invisibles: How to Build Your Credit Profile.

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Many individuals are “credit invisible.” This means that they don’t have enough relevant information in their credit reports to produce a credit score. If you find yourself falling to be in this category, it can be impossible to apply for loans or credit cards, get a mortgage, or even land a job. Here are some proven ways to build your credit profile and establish a history.

Make use of alternative data

Credit scores are usually generated based on comprehensive repayment histories or credit reports. If you lack these, it’s possible to generate a score based on alternative data and supplemental information like utility, cellphone, and rent bill payments. Even without a history of repaying home, student, or auto loans, you’ll now be granted access to a credit score through alternative data credit scoring. It also works if you have a credit score that has been previously damaged. This kind of data will be able to produce a credit assessment that is highly predictive and unlike traditional credit scores.

Affiliate yourself with a community bank or credit union

Join a local credit union and take out a small signature loan or credit-builder loan. With these kinds of loans, the local bank or credit union will first place your loan money into an interest-bearing savings account which you’ll make payments to. Your payments and activity will get reported to the credit bureaus. Once you’ve fully repaid the loan, you’ll be able to receive the money and you’ll have built up an adequate repayment history.

Add yourself to an existing credit card account

Seek the help of a family member or loved one who possesses a long-established, positive credit history. Ask if they can add you to their credit card account as an authorized user. The older their credit card, the better since the information that dates back to when the card was first opened is included on the user’s credit file. Once you become an authorised user, you’ll be issued a card, but you won’t need it to make a credit history. This card is directly linked to the primary cardholder, and they’ll be responsible for the charges made on it. It’s best not to use it at all so that you can avoid getting into any conflict with them. Check your credit score when you’ve had it for several months. If your credit score is at 670 to 740, then you can apply for your own card.

Make a request for a secured credit card

Applying for a secured credit card doesn’t require a credit score, but it does require you to put down a refundable deposit which will serve as your credit line. This means you’ll be borrowing against your own money. If you’re unable to cover payments, the lender will take money from your deposit in order to repay it. Make sure to use the card sensibly by only charging small items on it that you can afford to repay in full by the due date. This will allow you to build a positive credit history in just a couple of months.

Besides paying your bills on time and applying for high-interest, short-term loans or cards, these simple methods will help you go from a non-existent credit score to a great one.