Getting Out Of Debt in 5 Easy Steps
Getting out of debt can be difficult but there are some basic steps you can take to be debt free or at least reduce the debt that you owe. This process can take a couple of years but you have to be consistent and fully committed to the process.
Remember that everyone is in a different debt situation and not all debt can be handled in the same way. You should choose the best choice for your specific situation and that is going to cater to your specific debt relief goals.
Step 1: Find Out Your Credit Score
Before you can begin to take the steps toward debt relief, you need to know the exact debt situation. You might be scared at first, finding out your credit score and report can be nerve-racking especially if you have a feeling that it’s not very good. However, in order to fix a situation, you have to know what the problem.
You can check out your credit score and report at, www.annualcreditreport.com. You will get a comprehensive report and score for free from each of the credit reporting bureaus (Equifax, Experian, TransUnion).
Step 2: Evaluate Your Credit History
Once you get a copy of your credit report and score, you can then begin to evaluate your situation. There is a range for credit scores, that generally give you an idea of where you fall on the spectrum from good to bad credit.
Excellent Credit: 781-850
Good Credit: 661-780
Fair Credit: 601-660
Poor Credit: 501-600
Bad Credit: below 500
This scale can differ depending on the lender but this is a good starting point.
Step 3: Weighing Your Options
Now is the hard part, deciding which debt relief option is best for you. There are 3 major ways to getting out of debt other than just making minimum payments.
Debt Consolidation: Where all your debt is combined together using a refinancing loan, which will then allow you to make one monthly payment for all your debts.
Credit Counseling: You receive debt advice and management from debt relief experts who will be able
Debt Settlement: In a debt settlement program, the company negotiates with your creditors to reduce your outstanding debt.
Step 4: Pick A Plan and Stick To It
Now that you have made a conscious decision to fix your credit and chosen a debt relief program, you are ready to fully commit. This can seem easy at first especially if you are going down the credit counseling and debt settlement path but you have to follow the program strictly. If you don’t you might just end up in more debt than you started with and be even further from your personal financial goals.
Being able to stick with a plan and reach your goals with also create better personal financial habits. You will see your hard work pay off slowly but eventually and feel better once your financial fitness improves. The key here is to stay on the path so that you can reach full debt relief or reduction.
Step 5: Being Financially Conscious
Now that you are being more financially savvy, you are becoming more aware of the consequences that your bad financial habits can have on your personal finances. This is a great time to start creating better and healthier habits that will be tools for you to use in the future.
Budgeting is a great tool and practice moving forward, it helps you keep track of your spending and manages your money well. This is a small adjustment that can really go a long way and keep you from over spending and making bad financial choices that got you into debt in the first place. Not to mention, it’s an essential tool for saving.
Saving is the number one reason you should be more financially conscious about your spending habits. Having money saved for an emergency situation can save you from falling into debt while also allowing you to live more comfortably and with less stress. You know that if you were to lose your job tomorrow or get extremely sick, you would still be financially stable enough to still pay all your bills.
No Quick Debt Fix
There is no overnight fix to getting out of debt but being realistic about your debt situation and wanting to find a solution is where debt relief begins. Remember that all debt is reported to your credit report and affects your credit score. Being able to take control of your personal finances to reach complete debt relief is possible but you have to take the right steps toward your goals and be open to options.