Learn how to reduce debt. There are debt solutions can that can teach you how to reduce debt right now, and over the long term. When the bills keep coming, the debts keep piling, and the collection calls are never ending, it can be a very dark time in your life. All this stress can make you feel like you will never see the light. You don't want to pick up the phone because you don't feel like talking to the bill collector on the other end so you just avoid the calls, right? The problem is, your debts won't go away... even if you avoid the calls. So, you might as well do what you can to reduce your spending now while you let someone else handle the collection agencies as you get your finances under control.
This is what you can do to reduce your debt right now: Take a look at your spending habits. One thing a lot of people do not understand is that the small expenses here and there, like buying lunch at work vs. a homemade lunch, or using the coffee machines at work vs. buying from a coffee shop daily - add up. Take a look at how you spend your money and see where you can cut back.
For example, if you buy your lunch at work you could easily spend $5-10 a day. A specialty coffee drink can be $3-5 a day. If you buy lunch 3 times per week and coffee every single morning, this adds up to you spending $30 - $55 each week. You could be saving this money by taking your lunch and using the coffee machine at the office. Over the course of the month, this spending habit adds up to $120 - $220. You don't realize it, but over the course of a year, you are wasting $1,440 to $2,640 in unnecessary spending. You could be using this money to reduce debt.
After you analyze your spending habits and see where you can cut back, the next thing you should do is get into a debt elimination program (especially if you owe $10,000 or more in credit card or personal loan debt). These programs offer debt-relief counselors that help you reduce debt within a certain amount of time (usually 36 months or less). Once you sign up they act as your representative and create a buffer between you and the collection agencies - blocking the calls and letters from coming to you! The best part is, many of these programs also offer a free initial consultation and require no money up front when you sign up.
At the end of the day, the key to success in any debt-elimination process is to stick to your plan. No method of debt-reduction will work if you only try for a week. A little discipline goes a long way.
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If you are struggling with paying back your credit card debt or any other unsecured debts there is legitimate help out there. Debt settlement usually makes financial sense for consumers with over $10k in unsecured debt. There are also other options available. To talk with a debt relief counselor for free help check out the following link:
Or Call - 877-853-6466
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Switching Credit Cards vs Cancelling credit Cards?
I have a Marriott Visa credit card, but no longer use it and don't want to pay the $30 annual fee. But I don't want to cancel it either, as it will lower my credit score. They said I can switch it to a card that doesn't have an annual fee. Will that effect my credit score the same as if I cancel it? Or if I just switch to another card, will it not effect my score at all? Thanks!
Answer
As an accountant and mortgage broker I will tell you that as long as you wont' buy a home, a car, or are anticipating getting a large loan within the next year....close that account. Sure it will hurt your credit score AND I WILL TELL YOU WHY.
Working closely with credit reporting agencies I've discovered that when you close a credit card account all payment histories on that account get thrown out of equation that determines your FICO. However, any negative information regarding that account you closed such as late payments or collections sticks with you for the next 7 years. Funny how the FICOs only look for negative info on consumers versus positive information....and it does this because ultimately FICOs are suppose to look at consumer risk---and to access that you need to look closely at the negative info alot. It's sad but a truth nonetheless.
Close the account because you really shouldn't pay $30.00 but if $30.00 doesn't affect you keep it only if you see your self buying a home, refinancing your mortgage, or car loan etc within a year of closing it.
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A revolving account with a balance 80% or less of the limit will reflect better than a maxed out credit card. A maxed out card will not reflect negatively on your score, but a card with some available balance will lead to a higher score.
Debt to Income ratio is one of four things that underwriters look at when doing a loan. DTI= (All monthly payments)/(Monthly Income). Higher DTI levels are allowed with higher credit scores. Your income is not reported to credit bureaus so DTI ratio never affects credit score.