A bad credit score doesn’t last forever if you can clear an old debt that’s ruining your rating. Sometimes, it takes a minimum of three years to recover from debt, but this is certainly attainable if you can take steps to improve your financial life.
Give yourself a chance to correct bad financial habits and start attending to your past mistakes to prevent debt build-up. Here are essential tips you can consider if you want to wipe out an old debt and at the same time, improve your credit score.
Make a List of All Your Debts
The first thing that you should do is gather everything and check how much money you need to pay back. Be it in the form of bills from credit cards, notices from student loans, or any other kinds of debt, gather everything and compute for the total amount.
You also need to check your credit reports to check for accuracy and identify all existing debts. This is essential because errors in the report can be corrected to save you.
Transfer Balances to a Credit Card with a Lower Interest Rate
Trying to get out of debt while the interest rate is eating you up might seem like a losing race. However, there are ways to get out. One is by transferring all your balances to another credit card with a lower interest rate. Make sure to check for the balance transfer fee before making a move to avoid massive charges on top of your bill.
Some credit cards even offer a generous sign-up bonus of 6 to 12 months 0% interest for balance transfers. You can take advantage of this offer to clear off debt without additional charges.
Live Below Your Means and Pay as Much as You Can
Paycheck after paycheck, make sure to set aside a bigger amount of money to settle your existing debts. To afford this, you need to budget your money and try to save as much as you can. By limiting your expenses monthly, you can have more to pay for your debt.
Remember, the extra money you save can go straight to paying for your debt. You can only splurge on something if you have already settled all your borrowed money.
Talk to a Financial Advisor
The last and best resort is to speak to a financial advisor. This professional can help map out everything for you so you can easily clear your existing debts. They also know how you can contact credit bureaus and regulators to support your claim when suspending an old debt.
Getting out of debt is a good start in building financial freedom. More importantly, you can have peace of mind that whatever happens, you don’t owe anyone anything. If you are drowning in debts and balances, make sure to follow these tips to settle everything on its targeted timelime. Start living below your means and saving more money to avoid borrowing from banks and lenders.