Don't caught without a plan or a goal in mind, decide what you want to accomplish and then put together a "game plan" to achieve your objective. Here are five tips that can help you develop your strategy:
1. Don't get a delay of game penalty - pay your bills on time.
This is the single most important factor creditors look for, by a long shot! Missing just one payment on a credit card or car loan can be very harmful to your financial health. And if you miss an entire month's worth of payments, it could mean big trouble.
2. Go into a half course offense - pay down your debts, and once you have paid them off, charge less in the future.
Creditors expect a certain amount of room between the amount of debt on your credit cards and your total credit limits. The more debt you pay off, the wider that gap and the better your financial picture.
3. Keep game plans that have worked in the past - don't automatically close older accounts you have paid off.
This way of thinking has been updated over the past few years. The rule of thumb has been to automatically close every account that had a zero balance to improve your score. When you close an account, this lowers the total amount of credit available to you, and you may actually be considered less creditworthy, so check it out before you act! Remember, the longer you've had the card, the longer you are establishing a credit history.
4. Work on your game - try credit counseling.
We may be preaching to the choir, but it's true: a legitimate credit counseling agency, like InCharge Debt Solutions, can help you improve your financial situation by helping you make on-time payments. A study conducted by the Fair Isaac Corporation, creators of the FICO credit scoring service, found that debt management clients were less likely to default on their loans or to declare bankruptcy than other consumers.
5. Don't go on the injured reserve list - avoid bankruptcy.
Try to avoid bankruptcy if at all possible. Those who file bankruptcy will find it very difficult to obtain new credit, and when they do it will probably be at much higher rates than before they filed. A bankruptcy will typically stay on a credit report for a very long time, up to 10 years. And during that time, it will be seen by everyone from lenders to landlords to employers - anyone who has access to your credit report.
My last, but maybe most important, thought is to take all of this great effort and prepare a budget that will help you reduce and/or eliminate your debt in a time period that is acceptable to you. Follow the budget faithfully, and you will be cutting down the nets in no time!