It's one of the great American past-times: ringing up credit card cebt. Many of us find ourselves in over our heads and have no idea how to get out! But we have some Fab & Fru advice from our friend The Debt Diva to get you managing your credit card chaos!
Know What You Owe
Getting organized is the first step toward getting out of debt and this means obtaining copies of your credit report. There are three major credit reporting agencies: Equifax, Transunion & Experian. When you are starting off on the road to financial rehab, we strongly recommend that you get a credit report from each of agency-there may be discrepancies between them that you'll need clear up. Start by checking out best www.annualcreditreport.com.
Your all-important credit (or FICO) score is your ticket to getting (or not getting) credit. Your credit score will range anywhere from 350-850:
* Excellent: Over 750
* Very Good: 720 or more
* Acceptable: 660 to 720
* Uncertain: 620 to 660
* Risky: less than 620
The lower your credit rating, the harder it is to get credit and financing. It will be more expensive for you to borrow money (ie: a higher interest rate) than someone with excellent credit, because you are a higher risk.
Now it's time to determine if you need professional help or not. Some of us will be organized and responsible enough to make a get-out-of-debt plan on our own. Others may need help from a pro. There are a few routes to take depending on your predicament:
Debt Management Plan
A Debt Management Plan is an agreement you make with a credit counseling agency (CCA) to help you make deals with your creditors. You agree to pay back all of your outstanding credit card debt over time, without taking on any new debt. In exchange for your promise to pay your debts in full, most creditors will give you better repayment terms, like lower interest rates and waived late fees.
Debt Settlement Plans
If you are too far gone for Debt Management, but want to avoid Bankruptcy, Debt Settlement may work for you. It's for those who want to pay back at least a portion of their debt, but cannot fully pay it back, nor afford a monthly admin fee. A settlement service works with your creditors to negotiate partial repayment amounts for you. Settlement programs have a more negative impact on credit report than a Debt Management Plan.
This should truly be your last resort. Declaring personal bankruptcy is a legal process in which a court order declares that you do not have to repay certain debts. It may sound like an easy way out, but it is anything but! A bankruptcy will stick to your credit report for ten long years. Depending on your age, the next ten years of your life could be when you want to make your most meaningful purchases: homes, cars, and even life insurance! You need your credit score to position yourself for the future, so while bankruptcy may at times make sense for an older person, us younger gals should try everything we can before we throw in the towel.
Road to Recovery
It takes on average about 2-5 years to get out of debt. Hey, it probably took you at least that long to get into it! We know it's scary, but NOW is the time to face your fears, take financial control of your future, and get on the road to living debt free!
For more Fab & Fru check us out at www.fababdfru.com.
What are your credit card debt horror stories?