How To Rebuild Your Credit And Pay Off Debt
Sometimes life just happens and there is an unexpected expense or emergency that puts you in a position where your credit is impacted. This can happen whether you own property or not. There are a few ways your credit can be impacted negatively including having a balance over 75% of the limit on your credit card, missed payments on trade lines, and collections. With that being said there are many ways that you can rebuild your credit and pay off your debt. Below are some tips. Know your own credit score
You have the ability to access your own credit bureau report through Equifax or TransUnion. From this report you will be able to see if have missed any payments, have any collections, and see if there are any errors on your credit bureau. If there are errors you can have them corrected. It may be a slow process, but the benefit to your credit report can be substantial. Generally any credit score over 680 is considered a good score, but the higher the better obviously.
Negotiate interest rates
If you have a Credit Card that has benefits such as points, your interest rate will often be around 19.99%. Although it might seem like a great idea to gain points, it might prove more beneficial for you to change to a credit card without the benefits, at a much lower interest rate in turn decreasing your monthly minimum payment and interest charges. 75% of balance
If you are over 75% of the limit of any particular trade line your credit score is impacted negatively and will decrease due to debt load. If you have multiple credit cards, you could try spreading the debt amongst them. You could also request a limit increase not to utilize the new credit, but to get under the 75% threshold. Budget by cash diet
It can be overwhelming when you first decide to start paying down debt and how to access the money to do so. An effective way to do this is by creating a budget using a cash diet. Withdraw the money that you require to live until you receive your next paycheque. Unlike using a debit or credit card, with cash: once you run out, you’re out. This is a great learning tool to stay within your budget. Reduce credit pulls
People often think that as soon as their credit is pulled, their credit score decreases. This is a common misconception. The more pulls over a short period of time is what causes a negative impact on your credit score. For example, if you go car shopping and the dealership sends your financing application to four different lenders before getting to the one which approved you – each counts as a credit pull. Use mortgage equity
By saying this I am not saying this is an ongoing solution or that you should treat your house like a bank account, but if you do have a large amount of debt combined with equity in your home it could be a great solution for you. You are able to access 80% of your home’s current value. By utilizing the equity in your home, you will increase your cash flow by paying off debts. Your monthly mortgage payments will increase as you are increasing your mortgage, but because your interest rate will be much better than on credit cards and lines of credit, you will be better off financially. This will also drastically improve your credit score because your debts will be paid off in full. Whether you are a home owner or not, there is always opportunity to improve your credit score. With these tips, you can start to work on building up or improving your credit score.