To most people who have spent most of their adult lives clearing their debts, nothing always seems to feel better than finally managing to clear them. Finally getting to eliminate all those debt problems and having no obligations in that area for once. But don’t start celebrating too soon. Work out how you are going to get your credit score on its feet again and try to maintain a clean financial record this time. The best way to do this is by paying your loan and any other credits you might have on time.
And that is precisely what this article aims to help you do; to help you stay financially stable and debt-free as well. Let’s get to it.
You will need to create a good budget to help you manage your finances. A good house budget will help you manage and even avoid getting into situations where you spend more than you should or even make too many purchases on your credit card. Create a budget that does not strain you financially. You can also use a spreadsheet to track your finances if you feel that that is a better option.
2. Have A Financial Safety Net
It would be wise to also build your own substantial financial safety net in case of anything. You never know when you might be faced with reduced income or layoff, or even get caught up in a situation where you cannot work. Here is where your financial safety net comes into play.
3. Timely Payment of Bills
Ensure you get into the habit of paying your bills on time. You should also work out how you will pay off all of your other obligations. This will positively impact your credit report and start repairing any damages that might have been caused by your other debts. Try and keep up with your bills as much as you can so that you do not end up in another financial mess so soon after getting out of another.
4. Secured Credit Card
If your past overdue loans damaged your credit to the point where you cannot qualify for the regular or unsecured loans, then this is the time to apply for a secured credit card. Secured credit cards require that you make some security deposit that is usually equivalent to your desired credit limit. This is put in place just in case you, the borrower, opt to default to pay back the amount borrowed.
5. Rebuilding One’s Credit
After working hard to clear your loans, it is finally time to start working on how you can rebuild your credit report. The first step you should take is looking at your credit report to know exactly where you are at that moment. Then you work out a way with which you can start rebuilding your credit without subjecting yourself to any financial hardships. As mentioned earlier, a secured credit card is one way to go about it.
6. Limit Your Credit Applications
Applying for a lot of credit products may not be a good idea and may also end up damaging your credit further. This is true as every time that you or a lender views your credit report, it usually leads to an inquiry being done on your credit account. Some of these inquiries may end up staying in your credit report for up to 6 years and may lead to a drop in your credit score.
You are finally done with all of your loan payments and feel like a huge burden has been lifted off your shoulders. This is the best time to start saving some of that extra cash for any emergencies that might arise in the uncertain future. So, you do not need to look for a loan again.
8. Debt Management
You do not want to end up in debt just when you have worked your butt all those years to get out of one. So, be smart about how you manage your debt and do not fall into another trap which may also take you more years to solve.