Wednesday, January 28, 2009

Reduce Your Debt Without Damaging Your Credit

In these turbulent economic times, more and more people are struggling under a massive burden of debt. With a financial picture that is tenuous at best, many people are left wondering how to reduce their debt without damaging their credit.

You may ask why those struggling with debt are worried about their credit score. Your credit score affects much more than most people realize. The most obvious fact is that your credit score will impact your ability to obtain a mortgage to buy a home or a loan to purchase a car, as well as how much those loans will cost you.

However, your credit score could also impact your ability to get a new job, or affect the amount you pay for insurance. With this in mind, many people are interested in preserving their credit while also eliminating their debt.

Here are just a few options that could help you get out of debt much faster, while also preserving your high credit score.

The first option is to increase your debt payments. Try to pay double or even triple your minimum payment amounts. The extra money will go to your principal balance rather than to finance charges. This will have you out of debt in a fraction of the time it would otherwise take.

Another option is to get a lower interest rate on your debt. If your credit is good (otherwise, why are you concerned with preserving your credit?), you may be able to get a lower interest rate by simply asking. Call your creditor and inquire about lowering your interest. You have nothing to lose, and many people have successfully requested and received a lower rate by doing this.

Finally, you may wish to consider consolidating your debt with a balance transfer or loan offer. If you have good credit now, you may be able to qualify for a lower rate loan which you could use to pay off your existing debt. Plus, if you transfer credit card debt to a closed-end installment loan, there is a good chance it will actually improve your credit score.

These methods should help you reduce the total amount it takes you to get out of debt, while also helping you to erase your debt much faster. However, if your credit is already bad, or if your monthly cash flow is too tight to make these options work, there are other options available to you.

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