Low credit score due to debt problems prevent many debtors to rearrange their finances and get a relief from the mountain of debt. Most debtors need fresh cash to cover their immediate payments and set them on the way to recovery. Even though loan interest rates are record low, with a bad credit score it is difficult to lower the high interest rate burden on the cards and personal loans.
No matter how hard it may be debtors should look to improve their credit score and refinance their debts with lower interest rate loans (may be promotional 0% interest loans on balance transfers). This will allow them to pay the debt down, not fight with high interest payments forever. They may be able to increase available funds to pay bills by being extra tight with their spending. For many it is unlikely to increase income in the short term in this difficult jobs market. It may take few months, but here is how anyone can improve credit score naturally;
First Check Your Credit Score and Get Your Credit Report
By getting credit report people can see exactly what the lenders and credit score agencies are seeing. Study credit report in detail. Is there anything that should not be there? Get on to bank or credit card company and see if they can remove an incorrect entry. There may be small amounts of missed payments and late payment charges. Aim to reduce them first. Study this document and consider ways of improvement. A person needs to identify the problem before he can attempt to solve them.
Clues to Improving Credit Score are in Credit Card and Bank Statements.
Have a good look at the credit card and bank statements. Is there anything in there that is not known to account holder. Sometimes, people budget all their outgoings to single dollar. Then, there is a direct debit or standing order payment set in their credit card or bank account that they have forgotten about and have not accounted for. Even though it may be small amount, this one payment breaks the balance and the person starts missing the payments.
Get the list of direct debits and standing orders. Go through all of it and cancel the ones that should no longer be there. It is not uncommon for a monthly direct debit to continue, even though the service related to it has been cancelled with the provider. Study these statements to find out what is going wrong.
Is there any bank account, store card or credit card account that may be closed? Reducing these accounts will help improve credit score.
Make a Detailed Budget and Payment Plan
List all the outgoings and any savings that can be made. Take action and cancel any memberships or not essential outgoing that can be done. Consider the ways savings can be made small or big. Small amounts of spending add up very fast. For example, by making coffee at home in the morning, preparing a lunch pack and giving a miss to small discretions in the day a person can easily save up to $20 a day.
Credit counselling and debt management agency services may be used to get help on budgeting and payment plans. These agencies may be able to put debtor on to a lower interest credit card plans, reduce the debt by getting the card companies cancel late fees and penalties. Some of these services run by charities and some charges monthly fees.
Try to Find Short Term Cash to Keep Up with Payments
Unfortunately, the bottom of the problems is cash shortage. Once the debtor prepares a budget and a payment plan, probably a little cash injections will be needed to keep up with immediate payments. Try to find the cash to tie things over. The debtor needs to keep up with the payments several months to see an improvement on credit score. This initial period may be difficult, but it has got to be done. To improve credit score a person must keep up with the payments. There is no other way.
Once Credit Score Improved Get No Interest Balance Transfer Credit Card Deals
If credit score was really bad, keeping up with payments even for a couple of months should improve it quite much. When a person with improving credit score applies for a new loan or a credit card, he may need to explain his situation. Most lenders will look at the recent position more favourably. Tell them that you had problems in the past, but you are now on top of them. And with a 0% interest balance transfer, you can recover faster until the 0% interest promotional period is over. They may allow the applicant a lower credit limit to start with.
Once back on track, people can keep getting low interest promotional card deals several times until they clear all outstanding debt. These offers are always around. This is the main point in whole exercise. Improve credit score to qualify for cheap loans and get out of debt much faster. They need to be well disciplined and determined to clear them all. Since the person will not be making high interest payments anymore, money that paid back will go straight to paying the debt down. That is the whole idea. These deals should not be used as a new source of spending. If it is used for further spending, person will be in a much deeper hole. This point is very important.
Homeowners can apply the same methods with slight variations until they reach to a good credit standing. The low interest rates may be around for a while. Homeowners should look to improving their credit score so that they can qualify for a refinance home mortgage loan with a good interest rate. This will put them on to a long term recovery. Refinance home mortgage loan will allow them to consolidate their high interest debt and give longer time to pay, reduce monthly mortgage interest payments and even fix mortgage interest rate. When the homeowner steadies the boat, they may consider making lump sump payments towards their mortgage.