Credit Card Debt: Reduce and Save

Credit Card Debt: Reduce and Save

RECBL - Real Estate News

Like many Americans, you may be looking for a way to bring down your credit card debt. To help, the National Association of Personal Financial Advisors (NAPFA) offers the following six tips.

1. Pause some spending.
Identify any automated payments that can be eliminated or temporarily paused while you’re paying off debt.

Consider delaying or reducing large annual expenses, such as vacations or holiday spending, for one year. These temporary changes can help you pay off debt faster.

2. Reduce your interest rates.

Take an inventory of all your credit cards, including the interest rates and minimum payments. Next, call your credit card companies to ask if they will waive any late payments or reduce your interest rate.

3. Eliminate your most expensive card first.

Pay the monthly minimum on each card to avoid fees. Apply any left-over money to the highest interest-rate card first. Once this card is paid off, take the amount you were paying and apply it to the card with the second highest interest rate while continuing to make minimum payments on all other cards. Repeat until you have paid off all your credit cards.

4. Create a written budget.

A written budget will help you stay out of debt in the future. Allocate some of your spending to an emergency fund so that you are prepared if a job loss or health crisis arises. Check in with your budget each month.

5. Set financial goals and focus on the long-term.

What is most important to you? Do you want to save for a home or go back to school? Articulate your goals so you’re more driven to reach them. The changes you make in the short term are temporary and purposeful and will help you reach future goals.

6. Toast yourself.

Being debt free is an important milestone that is worth sharing and celebrating. Create a memory - a visit with a friend or a social media post - that you can recall when you are tempted to overspend again in the future.

Source: National Association of Personal Financial Advisors (NAPFA)



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How Much Do You Know About Your Credit Score?

How Much Do You Know About Your Credit Score?

RECBL - Real Estate News

While your credit score affects everything from your ability to buy a car or a home to how much interest you will pay on the loan, many people don't know how these scores are calculated or what impacts them positively or negatively.

Moreover, says the Credit Federation of America (CFA), more than 25 percent of respondents in a recent survey did not know that a low credit score could increase the cost of a car loan by $5,000.

More than half didn't realize that utility companies, cellphone companies, and even insurers sometimes check credit scores before issuing services - or that multiple inquiries in a short time, as when you are shopping for a loan, are treated as one inquiry in order to minimize the impact on your score.
The CFA provides more about credit scores that every consumer should know:

All your credit scores are not the same - Most people assume their credit score is a single three-digit number, but each of the three major credit bureaus (Experian, Equifax, and TransUnion) scores you differently, since they don't necessarily have the exact same data in their files.

Closing old accounts will not necessarily boost your scores - Closing old or inactive accounts may inadvertently lower your credit score because now your credit history appears shorter. If you want to simplify, close newer credit accounts first or put the cards away so you don't use them but your credit history stays intact.

Paying off a bad debt will not erase it from your score - Once a debt goes to collection, or you've established a history of late payments, you will deal with the consequences even if you pay off what you owe. It will show as paid, but it is not erased. Also, while your score will get a boost if you pay off an old debt, it may not be by as much as you think. The best way to increase your scores and keep them high is to make payments on time every month over the long haul.

Co-signing for a loan impacts your scores - When you co-sign for someone else's loan, you are responsible for the debt - and if the person you’re co-signed for does not pay, your credit score will be impacted.

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