Disclosure: This is a sponsored post created for Nationwide Debt Direct. All thoughts and opinions are 100% my own.
You’ve defaulted on your loans, credit card payments, and medical bills for far too long. Now, you are ready to get your finances and credit back on track. For many, the question is, how do you do this? If you had all the cash to pay your debts in full, you may not have been in this situation, to begin with. So, unless you’ve won the lottery or come into some other means of obtaining a large sum of money, review this article to find out how to get your finances and credit score back on track.
The Factors Affecting Your Credit Score
To increase your credit score, you need to first understand the five factors that affect your credit score.
- Payment history
- Amount owed
- Length of credit history
- New credit accounts opened
- Total credit mix
Your payment history and the total amount of debt owed are the two most important factors affecting your score. Each category, of course, is important but those two are highly weighed. Your payment history will reflect if you’re missing payments or are just late on payments. Public records and items in collections are other negative factors affecting your payment history.
The amount owed is not always a negative thing. Having too much money owed or having a bad debt to income ratio is what can hurt you. You never want to have all your credit accounts used. You should show that you are a responsible borrower and not indicate you could have problems making payments on these accounts.
Your Options to Getting Rid of Debt
There are a few ways to get rid of your debts. For one, you can pay them all in full, but again, unless you have a large sum of money on the side, this option may not be available to you. You can also opt to consolidate your debts. This would be working with a debt counselor such as Nationwide Debt Direct to work with these creditors and make it easy to make one monthly payment.
Another option to get rid of debt is to settle your debt. It may seem like dipping into your savings, but you’ll save more money over the long run. Nationwide Debt Direct is a great company to work with as they are leaders in creating debt settlement plans that work in their clients favor. The best thing is their debt counselors keep it real with you. They will tell you what is in your best interest even if it doesn’t turn out to be debt settlement.
Budget to Save Money
So, if you don’t have a lot of money to dedicate towards settling your debt, you can always start budgeting and make payments on your debt. Budgeting and bringing in additional money can start clearing away your debts and save you money on interest.
Take a $5,000 balance credit card with an APR of 19% for example. For a 60-month plan, you will pay $130 a month, with $2,771 in interest. However, if you increase your payments by just 30%, or up to $169, you’ll pay this off in just 41 months and only pay $1,799 in interest. What could you do with the extra $972?
Use Free and Helpful Resources for Debt
There are so many free and helpful resources available to help you become debt free. For instance, I mentioned above about the five factors that affect your credit score. You can see all your factors by pulling up your credit report on a free site such as Credit Karma.
If you want to monitor your debts and keep your payments on time, combine everything easily on Mint.com. Here you can safely keep track of all your finances, budgets, and debts and see your debt reduction. You can see all bank accounts, credit card accounts, and installment loans. Mint.com even alerts you of payment’s due.
If you want to help yourself automate your savings, check out Digit.com. It keeps track of your spending habits so it knows just how much to take from your checking account and place in a savings account. You’ll barely notice it. You can withdraw your money at any time though.
It took you years to possibly get in your debt situation. So, remember, clearing your debt will not come overnight. However, following these tips and working with a debt professional is your first step to changing your financial future.
What are your best finance tips?