Repaying your debt can feel like you are stuck in a never-ending loop. Having a plan in place can help better manage your debt and pay off those loans forever. It's time to repair your finances and achieve financial freedom. Find out how to apply for a debt management plan. Below are 9 tips that can help you discover how to take control of your debt and your credit score.
1. Pay On Time
Late payments reflect badly on your credit score and can result in penalties, interest and other additional charges. Make your payments on time to avoid credit agencies tracking you when your payments are more than 30, 60 or 90 days overdue. In fact, try to start making payments early for a change.
2. Check Your Credit Report Regularly
Monitor your credit report to ensure that it is accurate and look for ways in which you can pay your debt off faster. You can get a free credit report every year on annualcreditreport.com. Wells Fargo customers who are eligible can check their credit report online on the Wells Fargo website. Requesting your own credit check won't affect your credit score.
3. Pay Extra
Try to pay more than the bare minimum that is due. This not only helps pay your debt off faster but reduces interest and can improve your credit score. In the beginning it pays off to pay extra each and every time.
4. Understand Your Limits
Maxing out your credit limits can have a negative impact on your credit score. It is recommended to keep your revolving credit under 30% of the limit.
5. Understand Your Debt-To-Income (DTI) Ratio
When you apply for new credit, lenders and credit providers will compare your current debt with your current monthly income. It's recommended to keep your DTI under 35%.
6. Only Apply For New Credit When You Need It
Only take on new credit when you really need it and only use what you can afford to repay. Multiple outstanding accounts and a range of finance options can lower your credit rating and can be challenging to manage.
7. Lower Rate Qualification
Check with your current creditors to see if you may qualify for a lower rate. If your credit score has improved or interest rates have decreased, you may qualify for a lower rate that you aren't getting.
8. Think Before You Close An Account
Closing a credit card account can reduce your available line of credit and may negatively affect your credit score. Keeping an account that is in good standing, with a good credit history and zero or a low balance will have a good influence on your credit score. Just make sure you keep your accounts and payments organized.
9. Create An Emergency Fund
Set aside funds in a savings account for unforeseen expenses so that you don't have to use your credit cards or apply or more credit when unexpected events arise. Being prepared financially is always a smart way to ditch debt.
