Your finances and your attitude towards them is one of the key factors that define you as an adult. Like every other responsibility we have, we can sometimes find ourselves in a predicament with it. In the case of finances, our biggest predicament is debt and its ultimate destination is bankruptcy.
It isn’t always this way, though. Getting out of debt is not that difficult if you show some vigilance towards it. And if you do end up in some sort of turmoil, then you realize bankruptcy is not exactly the scary end that haunts your sleep as well.
Your Credit Score Can Make or Break You
It seems a little scary to have all your financial prospects depend on a little score that you can’t even calculate on your own but this is the reality we live in. A high credit score can save us from the prospect of bankruptcy and a low credit score can throw us right at it.
The good news is that your credit score can be built up at any time you come to your senses. It isn’t even that difficult. You should just pay your credit card bills, loan payments, and utility bills on time, be careful when requesting credit and try to not spend too much of your credit card limit.
Your Credit Report Can tell Everything About You
Whether you are going to a loan dealer, a credit card company, or a job interview, keep in mind that they always check your credit report. This is because a credit report has your entire credit and debt history in it and all these companies need to make sure you can be trusted with finances before actually trusting you with their finances.
This is where it helps to always request copies of your credit reports and go through them in detail to make sure there are no errors. Any errors you find can be disputed and corrected and it is best that you catch them before applying for your loan rather than after being rejected for it.
A Careless Behavior Will Only Take you Downhill
You need to take great care when spending money and paying bills and there is no shortcut to it. When you start missing debt payments and bill payments, you start lowering your credit score. A low credit score means higher interest rates, no chances of flexibility by your lender, and being stuck in this vicious cycle for ages to come.
If you find that you have already started accumulating a sizeable debt, it might be a great idea to create a budget. A budget gives you an accurate idea of how much of your money goes where and also discloses any possible cutbacks you can make to save up money for debt repayment. Sometimes simply keeping a good watch on your spending is all you need to save up a good size of money to help with debt repayment.
Getting out of Debt is Achievable with the Right Techniques
Getting out of a lot of debt is not easy, let’s clear that out. But despite that, it is true that there are some tried and tested techniques you can use to pay off as much as you can.
First of all, try working another job. Putting in a few more hours every week will have you earning a good amount of extra money, all of which should go into debt repayment.
Other than that there is the snowball effect. In the snowball effect, you start by paying more than the minimum payment on each of your smaller bills and then gain enough momentum that by the time you have rid yourself of most small bills you can target the larger ones easily.
Using Credit Cards When in Major Debt can Bite You Back Badly
Credit cards can be a Godsend, especially because they make cash in hand look useless. But when you are in debt, you have to make liquid cash your best friend. Using your card even after a sizeable debt makes credit card companies suspicious of you and can make your interest rates go way up. This is why it is great to use liquid cash for at least the smaller expenses of the week like grocery and gas.
Asking for More Credit is Also Detrimental
It seems like a great idea to simply ask your credit card company for more credit when you are running out of it. But, again, this will make the company suspicious of your actions. Your interest will really skyrocket as well.
Bankruptcy is There to Help You
If you think you have done everything you can to get rid of your debts, and still don’t see the light at the end of the tunnel, maybe it’s time to consider going bankrupt.
Please keep in mind that bankruptcy is not the end of the line and it can actually make you live a much better life than before.
There are Different Types of Bankruptcy
There are two types of bankruptcy that are best known by our people: The first is chapter 7 Bankruptcy and then there is chapter 13 bankruptcy. You have to apply for both by requesting the government. A finance agent might be able to help you out with which bankruptcy you should apply for.
Chapter 7 bankruptcy seizes all your property and uses it all to pay off your debts.
Chapter 13 bankruptcy is less harsh. You still own all your property and can mortgage it off on your own to pay off debts.
You can Always Bounce Back
Rebuilding credit after bankruptcy for beginners as well is not very difficult. Many people out there have declared bankruptcy and then turned over a new leaf and built their credit up from scratch. Just keep in mind that this is a law designed to help out people in need rather than one designed to put people down forever.