It is quite difficult to get proper credit these days, whether we are looking for home loan, credit card loan or car loan. So it is important for us to maintain good credit score and manage our existing debts. Lenders are no longer handing out debts with no interest loan and zero down. Credit cards are also often offered only to people with goo credit. Many households have debts that are equal to their disposable annual income. It means than an average family could have $50,000 of debt or higher. Personal debts can be growing at a very alarming rate in the society and it all could start by charging our fast food meal. There are three important components of debt management that we need to know:

3 Important Components of Debt Management

  1. Accurate assessment of the current situation: Consumers should make a list of their current financial conditions, with a chart, list or whatever they are most comfortable with. It is important for us to include expiration dates, interest rates and overall amounts. We could know about our present financial situations by getting free credit reports. FICO scores should be obtained from all three national credit bureaus, TransUnion, Equifax and Experian. Financial experts advise that we should monitor our credit reports development on these three bureaus. Federal Law has stated that we are entitled to get a free copy of credit report, once a year.
  2. Make an effective budget: We should make an effective budget and stick to it. Budget will help us to stop the increase of our debt and decrease it gradually. If we want to pay our debt down, we need to have a budget. We need to be detailed and specific in our budgeting. Other than for emergencies, it is important to determine things that should be included in our budget. We may need to carry small notebooks to write down details that we find and they can be included in the budget later. The smallest expense is essentially an obstacle in allowing us to pay down our budget. Even if it is $3 each day for a cup of coffee, we should include the expense in our budget.
  3. Seek help from debt consolidation agencies: By consolidating our debt, we could potentially lower credit card debt by about 70 percent. It would be much easier for us to cut our monthly payment and refinance our home mortgage loan. When refinancing, we should make sure that the closing costs won’t outweigh the savings in our monthly payment. Home Equity loan is another option that we need to consider. We should be aware that new credit shouldn’t be seen as a license to incur additional debts. It is important for us to avoid adding more charges to our existing accounts. We could also get help from credit counselling services. We should try to add accountability to our debt management. It is important for us to create proper debt solutions. Once we are able to reduce debts and stop incurring new ones, we are in a direct way towards being free of debt.