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July 2nd, 2007
Debt and your credit score are not very good friends. Unfortunately for credit scores, debt likes to pick on them and make them feel bad. Many of us have had debt hurt our score, and we want to do something about it. So how can you pay debt in a way that will help you raise your credit score? We all know how to pay debt, but many of us are not sure how to do it in a way that truly helps us the most. So let’s go through some ways that we all can pay debt more effectively.
Know Your Debts
I know that most of you would rather forget about your debts quickly and pay them off soon. But you actually need to figure out a little about each of your debts. Learn how much the payments are, and for how long. Learn what will happen to each debt interest-wise, and how often payments are needed. This is a good way to manage your debts better. Once you have learned what your debts are about, then you will know of better way to tackle them. Do not just blindly handle debt, because that is when you can get hurt. You may not manage your interest correctly, and may try to do too much. You also need to see if there is a penalty of paying off debt too quickly. It is good that you want to go up and beyond the monthly payments in order to get it paid off quickly. But some companies to not look upon that favorably. They like the interest you have to pay and they will want to drag that on for as long as they can. It is very inconvenient, but it is something that definitely happens.
Figure Out the Importance of Each Debt
Now, don’t get me wrong, every debt is very important. But some can have priority over others. For example, your house mortgage. That is going to be paid off somewhere between 15 and 30 years. You already have that planned out. So why would that take immediate precedence over a small debt like credit card or phone bill? The smaller ones should not be the hassle, so you need to pay those off quickly. Once you are relieved of those, then you can continue to focus on that mortgage. Only now, you will not have a lot of little debts holding you down as well. So remember, every debt is important. But be aware of which ones are already extended far out, and which ones you can focus on immediately. That way you clear your finances up, and won’t have a lot of troublesome debts for the long term.
How Does My Credit Score Get Fixed?
By paying off the debts you are showing that you really are looking to fix your situation. Then once you have cleared debts, creditors will make sure that those bad marks from the debts get off your record. That also plays into why you should pay off little debts quickly. You will have more bad marks taken off of your report in a small window of time. Instead of just working on one large debt and only having one mark removed from your credit. So just be aware of your debts, because when you get to know them, you can control them easier.
Additional Resources:
- www.bankrate.com/brm/news/cc/19980713.asp - What Debt to Pay Off First
- articles.moneycentral.msn.com/SavingandDebt/ManageDebt/WhenPayingOffDebtIsABadIdea.aspx - When Paying Off Debt is a Bad Idea
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