Know how to become debt free without ruining your credit

February 11th, 2010 |

Many people think about credit score when seriously drowning into debt and might be searching for something that could help you become debt free with out ruining credit. First you need to decide are you keen about building credit score or want to eliminate debt that is mounted because you can’t achieve both at a same time.

Before, taking a decision ask yourself whether you are going to take credit even after mounted with huge debt? If no, then why are you worried about credit at this moment? If you are still worried about not spoiling the credit score then you are obviously like someone who thinks about the garden, which get spoiled with the fireman’s boots when trying to save your home that is burning. If the house is saved, can’t you rebuild the garden again? It is true with credit score also.

There are many options available if you want to get out of debt fast such as debt consolidation, debt settlement and credit counselling. Each of the methods mentioned above can be used to get out of debt but they have their pros and cons.

Debt settlement works by entering into an agreement between creditor and debtor to settle the debt to the amount that is lower to what you actually owe. In this process, the debtor stops paying to creditor for 3 to 6 months. With this defaults, the creditors will report to credit rating agencies as a result the credit score get dropped.

Debt consolidation, in this process you make a single payment to debt consolidation companies which in turn will be distributed to your creditors after taking their fee. You creditors will report to credit rating agencies the act of using a third party, debt consolidation firm that will have negative affect on your credit report.

If this is the case with any debt relief options, how will one manage to keep their credit score intact and become debt free? In order to have a good credit score you need to make payments on time, make more than minimum payments, cut back on your spending, avoid using credit cards further and increase your income.

After knowing what can negatively impact your credit score, use budgeting techniques to get out of debt without ruining your credit score. First step to pay off the debt is to formulate a budget for all your expenses and see for areas that you can save to pay off the debt.

See if you can speak to your lenders to convince them for lowering interest rate on debt. This can be possible if you were to pay bills on time for more than a year.

If you can earn some extra income. you can speed up the debt repayment process. This might be possible by working part time or using your skills online that help you get some extra amount.

This are the ways how you can repay the debt over a time without ruining credit score.

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