Free Credit Report and Score
If you've decided to take that important first step in getting out of debt, settling your debt, or refinancing your home, you need to get a copy of your free credit report and score.
There are several kinds of debt including personal loans, credit card accounts, cash advances, mortgages, refinancing and hard money lenders. Choose the debt with the highest interest rate to pay off first.
If you are trying to figure out how to improve your credit score, one alternative is to pay off the credit card but keep the account open. Many people have not just Visa, MasterCard and Discover cards, but also retail and online store cards, gas cards, and cards issued by just about any merchant you can think of. Creditors look at how much credit you have available and how much you've used, as well as other factors like your payment history, employment, and income. Closing the accounts brings down that ratio of used and available credit.
The first thing you should do is consolidate your credit cards to reduce the number of cards you have available to you. Having fewer cards helps your credit score. Talk with your bank to find out if they will close an account pending payoff of the balance, and then work to pay down the debt. Pay down the cards with the highest interest rate first, while continuing to make payments on all your accounts.
Next, you'll want to work on paying down the balances of the other cards you have. Credit scores are impacted not just by number of cards, but also how close you are the credit limit on those cards. Even if you pay on time, having maxed-out cards can lower your score. Start paying down those debts by adding a little extra to your monthly payment.
When you pay extra beyond the minimum monthly payment, you are helping to reduce the principle balance on which interest is calculated. So, you lower the total amount you owe interest on, as well as improve your credit score. It's a win win situation for you.
What if you don't have any extra? It's nearly always possible to squeeze a little extra out of your monthly budget. Think about the spending that you do completely unconsciously: picking up the impulse items when shopping at the supermarket, monthly subscriptions to magazines and newspapers, gourmet coffee spending.
If you don't have anyplace to cut, or even if you do, you can also find small, part time ways to make money and add that income to the payoff plan. For example, you can find many ways to make money online through eBay, Amazon Marketplace, or other online vendors where you can sell extra things of your own, or sell their products to others for a commission payment. It is possible to bring in a few hundred extra a month with not a lot of additional effort and literally no upfront investment. Put all extra income from a business or second job directly toward your debt amount. It's tempting to think that since you are working that second job, even if it's online, that you deserve to treat yourself.
By following these steps, and getting rid of your credit card debt, you can start to improve your credit score, but most importantly, you'll be building a stronger financial future by paying down debt and starting to save more for your future. It all starts with getting a copy of your credit report.
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