You are on the right track, if you are seeking a debt management plan, and I can help you with some additional Debt Pointers to keep you moving towards debt freedom, financial independence and a good credit report in the near future.
Very quickly, if you want a free debt consultation with one of Bill's approved debt help partners, where they can give you the debt pointers you need and make certain that you are saving the most off of your debts, click here:
But, if you first want to do some homework, then here is a list of things that you should know and start thinking about.
Getting out of your debts is the first debt pointer that i would give you. Then moving on to credit pointers, there are several things that may help you start rebuilding your credit while you are working with the debt management service. Also, it is important for you to be aware of two specific features, as it applies to credit rating, of your credit counseling / debt management program:
1. a DMP (debt management plan) does not impact your credit score (also known as a FICO score); 2. most lenders look at being enrolled in a debt management plan as a negative mark, including treating it as if you had filed for Chapter 13 Bankruptcy.
Moving forward, there are some things you can do to improve credit. The first step is to pull a copy of your credit report from each of the three bureaus -- Experian, Equifax, and Transunion. Carefully review your credit reports to make sure that all information appearing on the reports is accurate and up-to-date.
If you find any inaccurate information that could be hurting your score, you should file a dispute with the credit bureaus to try to have your report corrected. Second, if you have any secured loans, such as a car loan, make sure that you make all payments in a timely manner, as timely payments on secured loans are an important part of your credit score. Third, you could consider opening a new credit line to begin establishing your future credit history.
If/when you graduate from your credit counseling debt management plan, make sure that you request the record of your accounts being enrolled in a debt management plan to be removed (if possible). Tou should consult with your debt management firm before opening any new lines of credit -- for some types of debt management, opening new lines of credit can seriously damage the debt management firm's ability to work with your creditors. If your debt management company says it's OK to open a new credit line, you may be able to find a bank willing to offer you an unsecured loan or credit card -- submit your information to the Bills.com Savings Center and we will try to match you with lenders that meet your needs.
If you cannot find a bank willing to give you a loan or credit card without exorbitant fees, you may be able to find someone with an established credit history who will co-sign an unsecured loan with you, allowing you to obtain a loan to start rebuilding your own credit. If you cannot find someone to co-sign an unsecured loan with you, there is always the option of taking out a secured credit card. Secured credit cards require you to deposit cash in an account with the credit card bank. The credit line available on the card is equal to the amount of cash you have on deposit. This may sound strange; why would you not just spend your own cash? However, secured credit cards report timely payments to the credit bureaus and may help you reestablish your credit history. Again, please check with your debt management company to make sure that the actions I have discussed above will not interfere with your debt consolidation plan.
Even if you do nothing, it is likely that your credit score will rebound on its own once your debts are paid off through the debt management plan. One of the most important aspects of your credit score is your debt utilization ratio (are cards maxed out). Paying off your debts will reduce your debt-utilization ratio, so as your program progresses, your credit score should gradually improve.
Also, as your old delinquent accounts age, the less negative impact they will have on your credit score. While the suggestions I have made above may help your credit score, your primary concern should be paying off the debt your already have and maintaining a clean credit history going forward.
Next, I will provide some debt pointers:
Debt Pointer #1: Sort Your Spending
To really attack your debt, you should be budgeting ( www.bills.com/guide ) and you need to first look at your spending habits. You want to separate those payments you are obligated to make (like housing payments, auto, and insurance) and see what other expenses you have throughout the month. You'll find that a lot of those "other" expenses are frivolous, such as going to the movies, dining out, and purchasing unnecessary luxury items (e.g. expensive shoes, watches, televisions, etc.). If you want to pay off your debt, you're going to have to make a few sacrifices (e.g. stop eating out, reduce your cable TV to just the basic package, etc.). Once you have an idea of how you're spending your money each month, and find ways to cut out excessive discretionary spending, then you then need to see what you're buying using your credit cards.
Debt Pointer #2: Get Out of Credit Card Debt
Credit cards are what get a lot of people in trouble. They simply charge items without regard to how they expect to pay for the charges later. For example, don't ever use credit cards for expenses that depreciate (jeans, pizza, groceries) unless you can pay it off in full. This is very dangerous and if it's not stopped, it can result in an uncontrollable amount of debt. So, after you sort your spending, the next step is to see what expenses you're charging on your credit card. If at all possible, you should never charge your "must pay" expenses. If you charge your electrical bill, you're merely transferring your debt from one company to another, and not paying it down. Pay your mortgage, car payments, and other necessities via your paycheck. If you are charging them and you do have the cash to pay for them each month, STOP CHARGING! Pay for them outright or use a debit card that won't let you 'float' your debts. The reason you're in debt is probably because your credit card charges are getting out of hand. By not charging your "must pay" items, you can ensure that your monthly "must pay" debt is truly getting paid down and not just getting transferred to your credit card company.
NOTE: If there is no way you can pay for your "must pay" items without charging them, you have too much debt. Your income is less than your total debt. This is commonly known as your debt to income ratio. You want your income to be higher than your debt, and the way to do this is to either increase your income or decrease your debt (e.g. sell that extra car/boat/RV or cancel the movie channel package on your cable TV plan).
Debt Pointer #3. Cut Back On Spending
After you've researched and budgeted for your spending habits and what you charge on your credit card, it's time to start cutting back. Take a look at your last credit card statement. What items are on there? Are there any charges that were not "necessary charges"? The occasional medical or car repair expense can't be avoided so don't worry about those. What you want to look for are expenses like clothing, restaurants, movies, and non-essential big-purchase items like televisions and sporting event tickets. These are the items you need to cut back on. Remember, if you want to get out of debt, you're going to have to make some sacrifices. That means no more going out to eat or to the movies. It's like a debt diet -- no pain, no gain!
No new clothes for a while. You need to cut back as much as you can so that you can put as much of your funds towards paying off your debt. If you don't cut back, you'll just be adding to it.
For further debt reduction help, check out the Bills.com
I hope that these debt pointers help you save and get out of debt and then help you rehab your credit rating so that you can get back on your feet fast!
For more information about credit, please visit the Bills.com Credit Solutions and Resources page at /credit-solutions/