If you are wanting to improve your financial future, then one of the first things you will need to do is to erase debt. Debt just weights you down with monthly payments,costing you money with finance charges, and can add stress your life because of it. Most any place that you start looking for tips for financial planning will tell you that you need to get out of debt before you start investing.
Beware of programs that claim to be able to erase bad credit and be a debt eraser, because most of these programs are just scams. Although they can legally erase debt, it looks almost as bad as a bankruptcy on your credit, so while you won’t be paying the debt back, it’s going to be a lot harder for you to get a mortgage, a refinance, a car, or even a credit card because of it. Think twice before considering these types of programs as a way to erase your debt.
If you want to really get out of debt without it harming your credit report, then follow these steps below:
The first thing you’ll want to start doing it to erase credit card debt. This is considered consumer debt, as opposed to a mortgage, a car loan, or even student loans. Instead of just trying to settle credit card debt, it is best to try and pay it off which will boost up your credit score. It is best to pick which credit cards have the higher APR for finance charges, so once you begin paying those off, you’ll be charged less and less in finance charges. Some schools of thought think that starting with the credit card that has the lowest amount on it can help you to have momentum, but if you go that route, then if you have a larger balance on a card with a higher APR, you’ll be getting more in finance charges each month. It is best to not get those finance charges, and use the money you are saving on finance charges to pay off your debt quicker. It is not good to have momentum leading up to your credit card with the highest balance on it, because then it will seem like a huge mountain compared to what you’ve been paying off, plus it will have grown because of finance charges.
As you begin to erase your debt, once you get below 50% of your total available credit (So, $5,000 left in debt if you have $10,000), your credit score will increase. That 50% mark is what creditors begin to look at. One trick that used to be really helpful for erasing credit card debt was to move your credit card balances to an unsecured credit card with 0% interest rates for a certain period, and then move them to a new 0% card once that trial period was over. Credit card companies got wise to this trick for erasing debt, and began implementing around 3% flat fee to move the credit card balance over to the 0% card. Sometimes this can still help you if you want to move from a credit card with a very high interest rate (above 3%) but just be sure the rate after the increase from 0% isn’t higher than the original card.
It is definitely possible to erase credit debt, but it takes hard work and focus, but once you’ve got your debt paid off, it is definitely a nice, freeing feeling. In the meantime while you are working hard to erase your debt, check out all the great free stuff over at Hey, It’s Free! – you won’t be disappointed!
