Last time, we discussed the
immediate steps you should take when recovering from a foreclosure experience,
including the creation of a budget and keeping up with bills and debt
maintenance. Once you've accomplished that and your monthly financial life is
stable, the next level is to make a plan to get out of debt entirely.
Make a Plan
A high debt load will continue to
keep your credit score low, especially as you emerge from a foreclosure, even
if you are "treading water" and current on your bills. Reducing your
credit card debts to 30% or less of the credit limit should be your primary
goal. This will also improve you "debt-to-income" ratio, another
factor considered by lenders when considering a loan package in the future.
Here's a quick guide to getting out
of debt:
1. Know your total debt.
2. Prioritize your debts - you can
either pay off high-interest debts first, as they're the most expensive or the
smallest debts first, to get some quick boosts.
3. Know your capabilities - making a
plan that has you paying more than you can afford isn't a plan at all - it's a
mistake.
Get Help
Repairing credit is definitely not a
one-man job. In addition to making sure your family follows your plan, you can
also seek expert advice. You will understand and manage your debt better if you
consult from credit counseling services. There are signs that it might be time
to look for a counseling service. One of them is when you've tried coming up
with a debt reduction plan on your own and failed. The most reputable companies
and agencies in the industry are usually members of the AICCCA, a
member-supported national association representing non-profit credit counseling
companies that provide consumer credit counseling, debt management, and
financial education services.
Here are a few things to keep in
mind when looking for a counselor:
• They should be willing to
offer a free initial consultation where you can ask them about their methods.
Then you can judge whether it's something you could do on your own.
• Ask about fees. All
credit counselors will charge for their services - know up front what you're
committing to.
• Ask in detail about how
creditors get paid. Most counselors have you make lump payments to them and
then they pay down debts after negotiating with creditors. This should be very
transparent to you.
Finally, A Credit Card
If you don't already have one, you
should get a credit card once you have a budget and a plan to eliminate debt.
When you acquire a credit card, use it only for purchases you can pay off
immediately. You will be right back into debt trouble if you splurge on
spending. Using a credit card wisely will demonstrate responsibility and raise
your credit score.
New You Credit Repair offers a
variety of uniquely effective solutions to common financial problems. Once we
review your financial situation, issues and goals, we will tell you which
services we recommend for your specific situation, and where you should start.
