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Proven ways to reduce your personal debt
The list of reasons to reduce your debt is lengthy. From a simple desire to raise your credit score to achieving financial independence, the reasons are many. Maybe you want to save for the future. Maybe your debts are overtaking your income and ability to pay them off in a timely way. Most of us have at least some debt, but all of us would like to see those monthly payments disappear! As a side benefit, your credit score will rise. This benefits you in many ways you may not even be aware of. Far better terms on home and auto loans, lower rental rates, better credit card deals, and yes, a higher credit score says something about your responsibility level to possible employers and others.
Defeat Your Debt and Raise Your Credit Score
If you've ever asked yourself, "How can I raise my credit score?" We’d like to share with your some steps to making it happen.We’d like to show you five proven methods for personal debt reduction that you can implement right away and start enjoying the benefits of being in control of your money instead of the other way around.
1. Start saving money. Wait, what? Yes- the first tip in debt reduction is to start saving money. This might make more sense than you realize. After all, what is one of the biggest drivers of debt? A lack of sufficient savings. No matter how much you pay down the debt you currently have, if you don't have enough savings to get you through the next emergency, you're just going to put the costs right back on the credit cards and rack up new debt. So the first step in reducing your personal debt is to make your finances more secure by saving more money.
2. Get a copy of your credit report. While you know about certain debts hurting your credit, there could be old, forgotten debts also playing a role in your low FICO score. If you're looking to raise your credit score then you need to take a look at the actual report that's behind the score and make a comprehensive plan to pay off all the debts contributing to it. There may also be mistakes on it that may impact your score.
3. Adjust your budget. The definition of insanity is to repeat the same actions over and over while expecting a different outcome. Maintaining your current budget while expecting your debt to magically disappear falls into the realm of that definition. Worse, it keeps you tied to personal debt for decades and hurts your confidence in gaining control. To finally vanquish your debt, you need to come up with a new solution and that starts with an adjusted budget.
4. Communicate with creditors. When creditors sell off unpaid debt to collection agencies, they do so at a startlingly low price because they just want to get something in exchange for the unpaid debts you owe. That means that many creditors might be more than willing to negotiate with you, the borrower because it means they may end up getting more than they would if they sold the debt. You can try to negotiate both the balance due and the interest rate charged, but keep in mind that if a creditor agrees to forgive any part of a debt, that amount may be considered a taxable gain to you and could increase your tax liability for that year.
5. Commit yourself to your plan. Once you've adjusted your budget, identified all your debt, negotiated with creditors, started saving more money and created a plan for debt repayment, you have to keep yourself committed to each of these steps in order for the debt reduction to be accomplished. Plans are only effective when you actually follow them, so do whatever it takes to stick to it and make these plans happen! Start off with a one month deadline. Then two months. Or even a week at a time- don’t think in terms of years, but shorter time periods. A week on a budget may be easier to stick to than an entire year at first.
No matter how much debt you have, you can manage it and reduce it to create a more stable future for yourself and your family. Commit yourself to the process and learn how to enjoy the sacrifices you make to bring down your debt.
If you’re really stuck and are in a position to need additional help getting free from debt, call us at Georgia Debt Relief. We’re happy to hear your story and give expert advice on any indebtedness issues you have, whether it's “how to raise my credit score,” or “how to avoid bankruptcy,” we can help.