You’ve been bombarded with credit card offers of all types since you became an adult, so it’s no surprise that you’re now thousands of dollars in debt. This massive debt, combined with the occasional missed payment, has caused your credit score to sink so low that it’s considered poor.
With a poor credit score, you’re bound to have issues with getting car loans, mortgages and other loans you may need. Fortunately, it’s rather easy to get rid of poor credit but only if you use some smart debt management.
The Five Rules of Debt Management
You might have seen all the commercials on TV advertising companies that claim to get rid of your debt right away. This is a huge lie, as getting rid of debt is not an overnight process. Rather, it takes time, and the use of a debt management plan, in order to eliminate debt and raise credit scores. By following the five rules of debt management below, you’ll be able to come up with a debt management plan that works for you.
Rule #1: Cut Up Those Cards
If you want to get out of debt, you have to stop spending. For some, it’s as simple as not touching the cards, but for others, it’s a good idea to take the cards out of the wallet and throw them in a drawer, or cut them up. Any good debt management plan involves ceasing to use the credit cards, so before you do anything else, do that.
Rule #2: Determine Your Total Debt
It’s amazing, but many people do not know what their total debt is. If you’re clueless in this regard, it’s time to take a little time to figure it out. Take out all those credit card statements and add up the balances. When looking at them, also look closely at the interest rates and minimum payments and write those down as well. You’ll be using it when establishing the rest of your plan.
Rule #3: Decide When You Want to Be Out of Debt
You have to have a goal, so decide exactly when you want to get out of debt. If the goal is to get out of debt within two years, three years or five years, you need to move forward in your debt management plan with that idea in mind.
Rule #4: Use a Program to Help You Decide What to Pay Each Creditor
All of the legitimate debt management agencies use computer programs like Microsoft Money to determine how much to dole out to each creditor. While these programs are a little expensive (usually $100-$200), they’re well worth the price as they will tell you exactly how much to pay every month, as well as how long it’ll take you to get out of debt and boost your credit score.
Rule #5: Negotiate
Believe it or not, but most credit card companies are willing to negotiate interest rates if they know it means they’ll be getting their money back especially when the borrower has poor credit and has missed payments in the past. So call up your credit card companies and explain your situation to them. Ask them to lower the interest rate, and if they say no, ask to speak to their supervisor and then ask them. You should be able to get most, if not all, of the credit companies to lower the interest rates which will help you to get out of debt faster.