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How can I pay off debt without ruining my credit score

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By: Amy
on 31st Jan,2015

Debt is a calamity many Americans face today.
How can I pay off debt without ruining my credit score


Debt is a calamity many Americans face today. With rising costs of living, inflation for food and other goods, higher medical costs, and many other expenses, it can be hard to make ends meet. Factor in low wages or even a period of unemployment, and you've got a recipe that produces a huge amount of debt in a short amount of time. The good news is that as bad as your financial problems may seem, there are always ways of paying off debt over time so that you can return to a more secure financial state.

Best Way to Pay off Debt


There are a variety of ways of paying off debt that may work for you and enable you to live a debt free life in the future. Sometimes, all it takes is some simple money management skills. In other cases, you may need to try something such as debt consolidation. Before you make any decisions, it is best to take a step back and examine your current income and expenses to see where feasible changes can be made.

What is Your Debt?


Debt comes in many forms—currently credit card debt, student loan debt, and mortgage debt are the three largest debt situations Americans face. Other debts can include high medical bills.


If you have credit card debt, then you must first figure out how to pay more than the minimum, or you may likely be paying off your debt for a very long time, as well as paying extra on all the interest that is calculated over time. See if you can transfer your credit card balances to 0% interest credit cards. This will enable you to pay off your debt faster. If you can't find a 0% interest card, you can probably still take advantage of lower interest rate cards. Sometimes even calling your current credit card issuer and asking for a lower interest rate might work as well.


If you have mortgage debt or student loan debt, you may need to find other means of ensuring that you can pay off your debt without falling behind and ruining your credit score.

1. Budgeting- Learning how to budget is a key to paying off debt and living a debt free life. You need to be aware of exactly how much you spend on bills each month, plus other expenses such as food and gas. After all, your expenses are calculated, you can see what you have left; this is referred to as disposable income. This can go into savings, be used for non-essential purchases, entertainment, such as going out to dinner or the movies, buying décor items for the home, etc.


When examining your expenses, you can see where you might be able to save more. If your debt is extremely high, perhaps you want to do away with some cable channels, newspaper subscriptions, or basically anything that you don't really need that might enable you to save some extra money each month.

2. Consolidating Your Debts- Debt consolidation is also a means of making it easier to pay off all your debts quickly and easily. A debt consolidation service combines all your current debts into one large debt, but typically at a lower interest rate, so that you only have to worry about one payment to make each month, rather than try to remember several.

Additional Ways to Pay off Debt

Borrow Against Your 401(k) - Not recommended, except in the most dire of circumstances.
File for Bankruptcy.
Ask for Help From Family and Friends.

How Does Debt Affect Your Credit Scores?


Most Americans have some type of debt. So long as you make regular monthly payments on time, your credit score might actually remain stable or even improve. The problems begin when you start to miss payments. Check your credit history to see how your financial actions have affected your score and if there is anything you might do to improve it. When you view your credit scores, you can see whether missed payments on your mortgage or credit cards have resulted in a lowering of your score. Typically you will have some sort of grace period to make your payments, even when they are late; however, if it happens too often or if you are several payments late, the account may go to collections, and your credit score will definitely be negatively affected.

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