Now that you know what is on your credit, checked your credit score, and called your creditors, let's talk about paying debt down. There are a couple of different ways to accomplish this potentially monstrous task. You can either use the snowball method or the avalanche method. In this post, I will explain how they work so you can make the best decision based on your circumstances.
Ok, so now we know what's on our credit and our credit score. Let's clean it up a little! I want to start with collection accounts since they are the most detrimental to your score. Never pay anyone to do this for you! It is pretty simple and I am going to walk you step by step.
I had to take a quick break from our credit discussion to announce my first student loan debt has been paid in full! I am super excited! I am in the middle of my debt snowball (paying debt down in order from smallest balance to largest). That particular loan started with a balance of $3832. It is now $0! That was my smallest debt, now on to the next! Woohooo!
Welcome to part two of the money talk about credit! I highly recommend reading part one first as this post is meant to be a continuation. So, now that you have pulled your credit report, let's pull our credit score. There are a few different ways to do this. When you go to pull your credit report from the three bureaus, they will ask if you want to purchase your credit score. You do not have to go this route! I will always recommend the free options first. Remember in part one when I said you really have hundreds of reports creditors can use? The same thing goes for credit scores. The scores are calculated in multiple ways so there may be variances between the scores you or a creditor pulls.
According to Investopedia.com, credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. Now, it would be great if there was nothing on your credit report because you never had to borrow money but for most Americans that is definitely not the case. The goal of this series is to get you acquainted with your credit, the terminology, the importance of paying attention, and how to fix it on your own (you don't need to pay anyone). Let's get started!