Paying off credit card debt is not easy but it can be done!
The first thing a financial advisor will tell you is to pay more than the minimum. Well duh. Right now I know times are tough and that we are all changing our spending habits and cutting back where ever possible. With this being said, Rule #1 is PAY AT LEAST THE MINIMUM PAYMENT, ON TIME, EVERY MONTH. Too many people just give up and stop paying because they feel that they are not getting anywhere with the minimum payment. For every month you do not pay you are increasing your balance and adding to your stress. For each card you pay late you will add, on average, $34 to your debt each month and it only gets worse from here. Many people who pay late end up getting pushed over their limit by the fees and are hit with an average charge of $36.50 per month. Say you owe $475 on a card with a $500 limit and you do not pay your bill. The next month you will owe them $475 + Interest + Late Fees + Over Limit Fees = A new balance of $550. If you would have just paid the $10-15 minimum you would have saved over $70 in just one month. Take that $70 and multiply it by every card your thinking about paying late next month and things really get ugly. I am not asking you to perform a miracle and get yourself out of debt over night but PLEASE be sure that you try and pay at least your minimum payment, on time, every month.
Rule Number #2 coming soon
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ReplyDeleteIf you have seen a credit report you know that at first glance it looks about as comprehensible as a preschooler’s scribblings. There is a ton of jargon used to describe “credit events”: things that affect the person’s credit score in the eyes of the credit bureaus and lenders.
ReplyDeleteI thought it would be interesting to throw together a guide to all the terms used on a credit report:
- ID Mismatch: This is a serious red alert on a credit report. This means the social security number, name or address of the person it belongs to is incorrect or inconsistent with government and public records. If you see this on your credit report, make sure you contact the Social Security Administration and the three credit bureaus rightaway.
- Public Records: This area of your credit report is better blank than filled out! Zero public records mean that you have had no bankruptcies, no tax evasion and no finance related crimes.
- Installment Loans: These refer to fixed payment loans such as a mortgage, car loan or student loans.
- Revolving Loan: This refers to a credit card, Home Equity Line Of Credit (HELOC) or any other credit line that you can draw upon. Needless to say if you see an installment loan or a revolving loan on your credit report that you don’t recognize, call the credit bureaus immediately.
- Positive and Negative Trade Lines: A negative trade line is a loan that has had late payments. A positive trade line has had no late payments. “Late” is a relative term across lenders but 120 days late is definitely considered to be a credit event. Once a loan gets designated as a negative trade line, it takes a long series of on-time payments before the record is cleared.
- Past Due: The amount that was due on a loan/credit line when a particular event occurred. For example, if a credit card was closed when the “Past Due” was set to $1000, it would mean that you closed the account without paying off your debt. Prospective lenders or employers do not like to see this, so make sure all past dues are set to zero.
These are the terms I found to be most recurrent. Let me know if you have come across anything else that puzzled you on a credit report.
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