Making A Debt Management Plan For Credit Repair
Since it has become very difficult to purchase anything without a credit card, one consideration helping to credit repair, and ultimately a credit rating when you are having trouble getting a credit card is to get a pre-paid card. Many lenders offer a pre-paid Visa or Master Card, which for all purposes look and work just like credit cards. The main difference is, instead of purchasing things strictly on credit, you make a deposit into a bank account that secures the amount of the card limit. Often there is a deposit fee required for opening a pre-paid credit account, and your deadline is based upon the size of the deposit that has been pre-paid. The advantages of prepaid cards include that they really can help with credit repair; and, if in fact, your credit is really in bad shape, they may be your only option for repairing it.
The best solution to credit problems is to exercise some debt management skills and pay your bills as on-time as possible while avoiding spending money on items you do not need for. Making wise decisions about spending and considering the implications of the decisions from all perspectives will help you make better overall spending decisions. Sure, bad credit is a tough hurdle to get over once you have developed bad spending habits, but it, like bad spending habits, can eventually be overcome. If you need help formulating a working plan that you can stick with on a long term basis, consider credit counseling as an option.
Taking charge of your credit reports can really help you reclaim your life. There is no reason to let bad credit ruin your plans, but in order to repair your credit, it is very important to know what your credit report status really is. After all, if you know what you owe, you can take the necessary steps to repay it. Also, it is very important to keep in mind that although the three credit bureaus (Equifax, Trans Union, and Expedient) may seem all knowing and all powerful, the information they have on you may contain mistakes. It has been known to happen to others.
Obtain a copy of your report from each of the bureaus, but don’t do what everyone says and just apply for a loan in order to get a free report. Every time you apply for a loan, there is a mark made against your credit rating and points accumulate. Instead, just pay the fees attached, it will save you money in the long run, probably a lot more than the fees to get the reports.
As you formulate your debt management plan be sure to consider long and short term steps that you can take. For example, prepaid credit cards will help in the short-term as they allow you access to purchases that can only be made with a credit card. However, they offer little in the line of long term credit restoration. While they are used as a credit card, the contribution that they have toward building or repairing credit is so small, that it is not really distinguishable on the credit reports.
Other cards will claim they can help restore your creditworthiness by offering you a larger balance card. Of course, they want a fee of $200-300 up front. Be warned, some of these companies are scams and should be avoided. When in doubt as to whether or not an agency is offering you a legitimate offer, check with the Better Business Bureaus to see if they have any complaints on file.
Debt Management Program
Getting started with a debt management program can affect your terms with creditors in multiple ways. When done right, you will enjoy many potential benefits offered by creditors to people who follow a debt management plan. These include:
- Lower credit card interest rates.
- Lower or no late/over-the-limit fees.
- No collection calls.
- No need to pay the full balance upfront for collection accounts.
- No need to pay the attorney or court fees.
A well-planned debt management program can enable you to repay your debts at a faster rate (within five years in most cases). Also, your repayment rate is affected by various benefits like reduced interest rates, which is subject to different creditors. An accelerated repayment becomes possible with lower interest rates as you can put more money into the principal amount of the debt every month. Apart from that, when you maintain regular monthly payments, after paying off your first creditor, you can distribute the same payment among the remaining creditors. This, in turn, increases payment to them, ultimately reducing the pay-off time.
All in all, you need to consider multiple factors while enrolling in a debt management plan. Your credit score is one of the many determinants. So it’s always better to consider expert help while taking such crucial financial decisions. Experienced credit repair professionals can help you decide the best debt management program according to your specific needs.