It’s Called Currency

In my “previous life” (read: first marriage and the subsequent divorce), I went down the road of lousy credit and all the stress that comes with it. I have since reformed my ways and now my credit is excellent. So now when someone asks me what I know about rebuilding credit, here’s what I tell them…

The best advice I’ve got on how to rebuild your credit is to
1. STOP DIGGING and learn to live within your means,
2. PAY OFF YOUR EXISTING DEBT and stop thinking you can borrow your way out of debt, and
3. CHANGE YOUR THINKING because credit does not equal money.

Item number one is a budget, and there’s really no way around that one. After all, if you don’t know where your money is going, how can you expect it to go where it is needed? Trim the fat from your spending, including cigarettes, Starbucks and the monthly “night out with the gang” at least until you’ve got everything under control.

If you need a bit of guidance on how to prioritize your existing debts to pay them off, I recommend the “snowball” method that Dave Ramsey uses. List your debts in order of the smallest balance owed to largest. Next to the balance owed, list the minimum monthly payment amount for that debt. Then, figure out how much money you can throw toward debt each month over and above the total of those monthly minimums and add that amount to the monthly payment for the smallest debt. Once you’ve paid off the smallest one, take the amount of money you were paying toward it and add it to the next smallest debt. In this manner, you always pay the same total amount from your bank account each month, but you apply an increasingly larger amount to the payments for each of your debts as you pay the smaller ones off. Before you know it, you’ve gone from eight debts to three and you can finally see the light at the end of the tunnel.

Realize that credit products (loans, credit cards, etc.) are sold by marketers and sales people. They usually earn a commission on the sale and therefore will try to talk you into more than you can afford. They’re not looking out for your best interests…that’s your job! Take the time to research before you buy, and if anyone tells you that the deal they’re offering is expiring and pressures you to make an uninformed or poorly researched decision, it’s probably something you don’t need.

Now if you’re sitting there wondering what the “quick fix” for your bad credit is, and getting frustrated with me for not giving it to you yet, I’ve got news for you: you didn’t get into this mess quickly, you’re not going to get out of it in a hurry either. Don’t let someone tell you otherwise. You’ll only end up deeper in trouble.

Tags: budgeting, credit, debt snowball, marketing // 1 Comment »