Breaking the Delinquent Debt Cycle
If you have delinquent debt and it's not because of a difficult life situation, you can take immediate action to break the cycle.
First, you need to get control over you money. If you don't manage your finances, this is one of the fastest ways to accumulate delinquent debt.
You need to know what you owe, who you owe it to, what the interest rate is and what the payoff is.
This way, you can start a delinquent debt repayment plan or you can use it to prevent yourself from going into delinquent debt.
Secondly, you have to know your weaknesses when it comes to finances and we all have an area where we're weak when it comes to money.
For some, it's shiny new toys and for others, it's wanting to live above their means.
Third, if you're in delinquent debt right now, don't make more debt. Stop using your credit cards.
Put them away and strive to pay cash until you can bring everything current again.
This might mean taking on a second job or cutting out some extras for the time being.
Pull Your Credit Score Up Despite Past Delinquencies
There are some steps that you can take to improve your finances regardless of what they're currently at.
Some people have experienced such financial upheaval that they no longer have any credit accounts.
The only things on their credit report are delinquencies. If this is something that you've dealt with, you can fix it.
First, get a credit card that's a secured one. With this type of card, you put up the funds first for the card. This is usually $500 for the minimum amount.
These cards do have a higher interest rate and most of them also charge an annual fee to use their card.
Don't let that discourage you if you're fighting back against delinquent debt. This is just a step in the right direction.
What you want to do is to make sure that you have the money already put back in savings to pay that monthly credit card fee.
You want to make just over the minimum payment amount and you want to do it faithfully.
There are some consumers who think they should charge something on the card and then pay it off immediately.
But it takes time for new accounts to be reported to the credit bureaus.
If you pay it off to soon, this does not help your finances at all.
You need to pay on this card for a bare minimum of six months, but a year is better.
Just pull the money from your savings account to pay the bill. This way, future creditors can see that you paid the bill on time every time.
A credit card is a revolving loan. That means it can stay open until you close it or the company closes it. You also want to look for ways to get loans that have a closed end. Both types of loan help repair your finances.
One of the best ways to get a closed end loan is to go to your bank and apply for the smallest loan that you can possibly get. These usually start at the $500 mark.
Depending on your credit score, you can pay anywhere from $50 to $65 in interest over the course of the loan.
You also want to keep this loan open and make monthly payments on it for at least a year. Just have the $500 plus the interest to pay off this loan already in your savings account.
If you've experienced financial hardship such a divorce, explain that to the loan representative and the underwriter will take that into consideration when it comes to approving the loan.
Once you pay this loan off, apply for another one that's slightly more and repeat the process you just did.
Delinquent Debt Tips
When you're delinquent on any account, you'll see a minimum payment due. Try to pay over that amount every month.
List all your debts and pay the smallest one first. This lets you feel like you're making progress at knocking off those delinquencies.
Know when the delinquency first started and pay attention to your credit report.
What some less than honest collection agencies will do is they'll continually change the date on the debt so that it looks like you just went late on the debt.
This is an illegal practice that they do because it gives them more time to collect on the debt. Debt collectors are limited by federal guidelines as to when they can bring legal action on a debt.
Learn more here in my section explaining all about loans and credit cards guide to help you get rid of debt and prevent further financial crisis.
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