Eliminating Debt Can Improve Your Credit

by GuestPoster on March 11, 2011

There are many credit risk score factors that lenders and creditors consider when making review on your application for a loan or credit. These include the number of your new credit accounts, your credit inquiries, your current balances as well as your minimum monthly payments. These will be the basis on the approval of your application.

Learning how to eliminate credit card debt and learning how to use your credit wisely is essential to building a secured financial future. However, when things become complicated like when you are already facing an unmanageable debt, making the right action at the right time is necessary. This will help you regain your credit score once it has been damaged.

Below are the four steps to eliminate your debt. These steps when followed and implemented can help improve your credit.

Step 1: Set up a budget – This can be a difficult task for many individual since easy access to credit cards can bring you temporary escape to reality – that is spending more than what you actually make. Budgeting includes writing down all your monthly income, expenses as well as debt. Then, identify how much expense you can get rid off so that the accumulated savings can be used to pay off your debt.

Step 2. Stop adding to the problem – If you are already on a knee-deep debt and you continue spending more on your credit cards, you are obviously not moving to the right direction. Instead, you are just making things even worse. So stop making additional purchases using your credit cards.

Step 3. Negotiate with your creditors - Another step on how to eliminate credit card debt is to get a better rate on your existing balances. Generally, your credit rating will determine whether you can be eligible for the lowest rate offers. Most credit companies are much willing to settle with you.

Step 4. Use cash rather than credit cards – Study shows that people spend more when using a credit card versus cash for purchases. It is because people do not attach the same value to noncash substitutes. So the next time you are going to purchase, try laying out cash. It is surprising how it makes you think twice about making such impulse purchase.

Ultimately, eliminating debt is the key to maintaining a good credit score. By following the above steps on how to eradicate them and by becoming aware on the various credit risk score factors, you will be able to successfully overcome the burden of debt. Moreover, patience and self control are also needed to achieve your goal.

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