Tuesday, May 6, 2008

7 Ways to Get out of Debt

Here are some sure-fire solutions
to 'repair bad credit.'

Like most 'diseases,' credit repair can take some time, but complete healing is possible. The first thing you need to do is find out what is being reported about you.

This is easy and inexpensive. For under $10, you can get your credit report from one of the three main credit reporting companies: Equifax, Experian, or TransUnion. Keep in mind however, that if you have recently been denied credit, you can get a free report from the same credit bureau the lender used to reject you -- as long as you do so within 30 days.

What You Don't Need is a repair clinic.

->> There is no legal way to 'repair' your credit.

Those that claim to know loopholes and shortcuts are merely out for your money. They may even get you into legal trouble by having you fudge the facts or creating a whole new file for you. Anything legal that a clinic can do, you can do just as easily and without the cost of 'professional' help.

Further Steps to Take:

1. Stop using your credit cards immediately.

Put them somewhere where they will not tempt you. You may consider keeping at least one card for emergency purposes. Additionally, with poor credit, you may find it more difficult to get a credit card in the future. If you keep at least one account open, then you won't have to worry about applying.

2. Be Honest With Yourself.

Taking a good hard look at your financial situation, particularly if it isn't good, can be very difficult. Yet, to get out debt you have to fully understand what the situation is.

3. Find the Errors.

Believe it or not, up to 40% of all credit reports have errors in them. If you find that your credit report shows something that is not true, you need to write to them with all the details. Be sure to use certified mail so that you can keep track of who you wrote to, when you wrote, and who received the mail on the credit bureau's end. Then ask the credit bureau to send a corrected report to anyone who has requested a report on you in the last 6 months.

4. Find the Omissions.

By law, you are allowed to add information to your report that you believe will help your rating. This might be additional information about a repayment of a loan, good credit you have with companies that do not report to the credit bureau, or salary increases.

5. You Must Have a Plan.

Whether you determine to pay your bills down a little at a time, take a second job, go to credit counseling, or file bankruptcy, you need to create a plan. Do the plan. Revise the plan. And Never Stop planning your future through your budget and financial planning.

6. Creating a budget is easy -- plus it can be fun.

But the real benefit is that you can use it to take charge of your future. Start with a simple list of estimates about where your money goes. Be as complete as you can and then add up the total. If the total doesn't match your total income, then add a category called Miscellaneous and put the difference there.

If your budget is more than your income -- you have discovered problem number one (for most people) is your budget. Stop spending money that you don't have. Do it Now. Find ways to increase your income and ways to decrease your budget expense until the totals match. But don't stop there.

Then, if you haven't already, create a category called Savings. Put something into your Savings and keep it forever. This will demonstrate your ability to keep a promise (to your self) and create all the self esteem you need to make the 7th step easy. The fun part is that your Savings can build into an account that earns money for you too. That Savings is another source of income. "My money makes me money."

Before you are out of debt, create An emergency fund. This is a separate savings place where you can borrow from yourself when it is NEEDED. Not just wanted but needed! And when you borrow from your self be sure to pay yourself back ASAP. Make it a big priority! An emergency fund it your security account.

7. Following your budget is the secret to your financial future.

You can always, revise, and adjust your budget while changing your plans. The second biggest problem (for most people) is that they always add more expenses to the budget plan whenever they get a chance. That does not work.

Increase your savings instead, and pay off your interest bearing debts. Interest payments are the "thief in the night" that prevents you from having what you deserve. It gives other people your money simply to allow you to exceed your budget. Dumb? I guess!

Take a lesson from my parents. They both walked to work until they could afford to buy a car. And when they did -- they bought a new car. That way we got the most out of our car with all it's benefits. And no money was wasted paying extra lenders for the privilege.

When your savings gets big enough, put some of it into better investments. I recommend an IRA to begin with because you can get increased earnings and extra tax savings. You should be paying taxes by now of course, it's part of a real financial plan.

Brad :-)

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