If you feel like it's getting more and more difficult to pay
off your bills every month, it may be time to reevaluate your
finances. Your credit rating can affect everything from job
prospects to your ability to buy a home, so it's never too
soon to take control of your debt. Here are some steps to
take:
1. Understand Your Credit Report
You should order a copy of your credit report once a year
to make sure that everything on it is accurate. You can get
a free copy if you were recently denied credit, and can purchase
one for a small fee anytime. Contact one of the three major
credit bureaus: Experian (800-682-7654), Trans-Union (800-888-4213),
or Equifax (800-685-1111).
Note: Be cautious of "clinics" that offer to "repair" your
credit. They may offer special strategies for improving your
credit score. But there are no hidden secrets about repairing
credit. You should focus on cleaning up any negative information
yourself.
2. Figure Out Where You Stand
Before you make a plan to get out of debt, get a sense of
where you stand financially. Look over your outstanding debt--credit
cards, car payments, mortgage, and student loans--to help
you determine what your true needs are and what has become
hardest to manage.
3. Switch to Lower Rate Cards
Pay off more than the minimum payment every month and look
for a competitively priced interest rate on the card. A $1,000
stereo could take you 12 years to pay off on a card with a
17% interest rate, and cost you an extra $979 in interest
if you pay only the minimum each month.
4. Consider Consolidating Your Debt
Rolling all your debt into one low rate card or other consolidation
loan can reduce your monthly payments and make tracking easier.
Merging your debt into your mortgage is often a good choice,
by refinancing your home or taking out a home equity line
of credit.
5. Create a Budget
Look at fixed as well as variable expenses. Do you need
really need a $50 haircut? Watch out for impulse purchases,
and consider a relaxing vacation camping instead of a European
tour.
6. Start Saving Now
Even if you're focused on paying off debt, you shouldn't
put off saving for your future. Take advantage of any 401(k)
or other retirement plan your company may offer, or use an
IRA if you are self-employed.
7. If You Feel You Are In Over Your Head.
Go see a credit counselor if you can't see a way out on
your own. Consumer Credit Counseling Services (800-208-CCCS)
is one national non-profit that can help you explore your
options and make a plan to get you out of debt.
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