There is a method widely used today that can offer you the opportunity to achieve a debt-free life.  It is called the Debt Snowball.  It has not only been recommended by experts in the financial field, but it has helped many individuals who have been drowning in debt.

How does it work?  The Debt Snowball is a method by which you begin to pay off those credit cards or loans with the highest interest first.  In order to begin the process, you have to make a list of all debt by interest rate.  Then depending upon your expenses, you would ascertain how much money you can put aside to begin paying off the debts.

For example, let’s assume you have four credit cards.  List the one with the highest interest rate first, then the next highest, and so on - with the last item having the lowest interest rate.

The next step is to take the extra money from your budget and apply it to the first high interest rate card.  So it would be the minimum payment plus the additional money you’ve put aside.  Then only pay the minimum on each subsequent card that’s on the list.

Once you have paid off the first high interest rate credit card, proceed to the second high interest rate card.  Apply the same method by paying the minimum plus the additional money you were adding to your first card.  Continue to pay the minimum on the third and fourth credit cards.

After you have paid off the second credit card, continue with this method on the third, and then the fourth.  You will find that with each credit card, the amount you pay will continue to grow in size.  As long as you maintain that initial amount taken from your budget, you should be able to pay off each card in an expeditious manner.

Why pay off high-interest credit cards first?  According to experts, there is more money to be saved by decreasing the debt that, under normal circumstances, would continue to grow due to the high rate of interest.

Many people have used the Debt Snowball method and have achieved a debt-free life.  However, it will take determination and motivation in order to faithfully execute this method.  High interest rates are the bane of our society.  By taking a proactive stance and a commitment to pay off your debt, the weight you’ve been carrying will be lifted.  Then, you can finally cut up three of the credit cards – keeping one for emergencies only - and pat yourself on the back for a job well done.

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There is a lot of misinformation out there these days about how to erase bad credit and repair your credit profile.

Today, I wanted to clear up some common myths about bad credit.

Every year, you can request the credit reports from the three agencies:  TransUnion, Experian, and Equifax.  The purpose in acquiring these reports is to check to ensure there are no errors contained therein.

* The myth that you cannot repair your credit is false.  By writing to each agency and requesting that problems be looked at, error corrections can be achieved.  According to the Fair Credit Reporting Act, the credit agency has to investigate any disputed item you bring to their attention.  Once this information is verified, the item can be removed.

* The myth that you need to invest thousands of dollars to fix your bad credit is false.  The notion that the only way to erase bad credit is by seeking the services of a credit repair agency is nonsense.  While there are accredited agencies that can assist you in improving your credit, it does not come cheap.  You can just as easily begin to repair your own credit by writing to the three agencies as well as the credit card companies in an effort to improve your credit score.

* The myth that bad credit will remain on the three agency reports is also false.  If you have fallen into debt and cannot pay a particular credit card company, the bad credit will remain on the report for seven years.  And if you file bankruptcy, it will be indicated on the agency reports for ten years.

* The myth that collection agencies can demand payment of a delinquent bill by calling you or your employer is false.  Collections agencies are the bane of society.  If you are contacted by a collection agency requesting payment for a bill that has not been paid, send them a letter requesting they cease and desist from contacting you.  Sometimes it is better not to pay a bill that is long past due since it will only be placed on the three agency’s report for seven years.

* Another myth is that an inquiry made by a company can reduce the FICO score.  This is incorrect.  What does reduce the FICO score is if you apply for several credit cards in a relatively short period of time, max out your cards or have late payments attributed to a certain account.

The bottom line is that bad credit can be fixed.  It will take some sacrifice on your part and may also entail contacting the credit card agencies as well as the credit card companies in an effort to show that you are willing to pay down your debts.  There are many avenues you can explore to achieve a high FICO score.  You can check the Fair Credit Reporting Act online that will offer the tools and resources you need to pay down your debts, repair bad credit and, in some cases, erase bad credit as well.

Thanks for reading.

-Adam

Technorati Tags: bad credit, credit, credit profile, erase bad credit, profile, repair, repair credit

In order to repair your credit, you will have to cut your expenses to free up more cash to pay down your credit card bills.

To do this you need to setup a budget or spending plan is the new term that people seem to prefer.

Here’s some tips on how to setup and live with a budget:

Do you have goals in life?  If any of those goals include bettering your finances, then start by creating a budget for yourself.  Budgets let people see where they are spending all of their money and allow them to make changes.

When people think of a budget, they often see bars and handcuffs.  No, you are not in jail but you may feel like you will be.  However, a budget is simply your financial goals on paper.  The truth is it will be hard for you to save for short and long term goals effectively without one.

The hardest part is the beginning.  But, going through the motions of creating and implementing a budget helps you to stick to it in the end.  Once you have faced the fact that you need one to succeed with your plans, living without one doesn’t feel like an option.

One way to live within your budget is through family accountability.  I don’t mean walking behind someone and monitoring everything that they buy.  It is more of a way to keep everyone on task.  When you hand out allowances to the kids (if that is a part of your budget), remind them that the money must last a certain amount of time.  Anything that they purchase including dining out at a fast food restaurant will be deducted from that money.  Kids have a way of holding on to their money when they know they have to use it for their expenses.

Preparation is important.  Let’s suppose that you have decided to carry your lunch to work to avoid spending money.  Well, if you don’t fix your lunch ahead of time you are more likely to forget it and then be forced to eat out or eat nothing.  The same goes for dinner.

When sticking to a new lifestyle it is necessary to give yourself all the help you can.  Think about buying staples and not instant food items at the store.  If you don’t make a grocery list, you are more likely to pick up things you don’t need and forget the things that you do need.  Leaving your coupons at home means no additional savings to lower your grocery bill.

All of these things play into sticking to a budget.  Agree ahead of time how you will commit to the budget.  Waiting until the machine breaks down means costly repairs.  If you feel yourself slipping, ask for help.  Other family members are there to support each other and help to make these changes to your financial picture permanent.

How do you stick to a budget?  Was it easy or hard?  If a budget doesn’t work you can adjust the numbers to manage better.  Don’t throw the entire system out the window and say that it doesn’t work.  Give your budget a chance.

Technorati Tags: budget, expenses, finances, planning, setup budget, spending plan

Are you ready to get back in control of your life and your finances?  Make the choice now to get out of debt and fix your credit.

Here’s some ways to help you get control of your debts:

Current statistics show that “8.3 percent of households owe $9,000 or more on their cards.  On average, today’s consumer has a total of 13 credit obligations on record at a credit bureau. These include credit cards (such as department store charge cards, gas cards or bank cards) and installment loans (auto loans, mortgage loans, and student loans). Of these 13 credit obligations, nine are likely to be credit cards and four are likely to be installment loans.”  Moreover, there were over “two million bankruptcy filings in 2005; an increase of 31% from 2004.”

While the statistics are staggering, undoubtedly the new figures for 2008 will be much higher.  This is due to home foreclosures, the economic downturn, and overall increased debt among consumers.   Thus, we have become a nation in debt.

The only way to get out of debt is to pay off the credit cards, avoid using credit cards except for emergencies, and pay with cash.  According to the Federal Reserve, “a majority of U.S. households have no credit card debt.  About a quarter have no credit cards, and an additional 30 percent of households pay off their balances every month.”

Resolving to get out of debt may be the single most difficult challenge we face today.  The stress of living from paycheck to paycheck may be the proverbial wall that prevents most consumers from punching a hole in it in order to see a glint of daylight.  But, steps can be taken to begin the process of digging out of this tunnel.  Start with a budget that you can stick to; keep just one credit card on hand for emergencies, and start paying more than the minimum amount required.

For example, if you have multiple credit cards or other debts, begin by paying off one credit card, then take the money you would have used to pay that card and add it to the amount you would pay for the second debt owed.  In this way, you will be adding more to the minimum amount required each month, and the debts will eventually be paid off one by one.

Paying for anything with cash these days seems like an antiquated notion.  Every day, we are bombarded with new credit card applications that arrive in the mail.  The problem is that we have fallen into society’s mindset that credit cards are a good, necessary, and convenient thing to have.  But the truth is that debt is neither good nor necessary, but places us in a position of constant angst.

Here’s a little exercise:  Take all the debt you currently have and add up the amount you pay in interest.  Shocking, right?  Think of what you could do with that money if you didn’t have debt.  Credit card debt is the bane of society.  Resolve to get out of debt; start planning now with a realistic budget.  The sacrifices you make today will bring happiness and well being tomorrow.

Technorati Tags: fix your credit, get out of debt, repair your credit