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Credit and Debt 101

Everything You Need to Know About Credit and Debt

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These days it's hard to go through life without taking on a little debt. Unless you plan on saving up enough to buy a house with cash, chances are you're going to need to get a mortgage. If you're thinking about going to college or hoping your child goes to college, you may need to partially rely on student loans. Borrowing money is just a financial tool, but when it isn't used properly it can cause more harm than good. Learning how to utilize credit and when to take on debt will help you keep your finances in good order.

1. How to Establish Credit

In order to borrow money you'll usually need some sort of credit history. Your credit report will log all of your debt obligations and help lenders see how you utilize credit and then determine whether or not to lend you money. But what happens if you don't have a credit history yet? You'll want to establish credit so that lenders have something to go by when you ask to borrow money. There are right ways and wrong ways to establish credit, so he's an outline to help you get off on the right foot.

2. Your FICO Credit Score

Your FICO credit score is the number lenders use to quickly catch a glimpse of your credit history. The higher your score, the more likely you will get a loan and the best interest rates. The bad news is that your score can be negatively impacted by something as simple as one late payment. This can drag down your credit score for years and make it more difficult to secure financing. Learn what your FICO score consists of and how you can keep your score as high as possible.

3. Improving a Poor Credit Score

Do you have a poor credit score? Don't worry, you're not alone. While there's no magic fix to instantly improve your credit score, there are some steps you can take that will get your credit back on track. Learn what aspects of your credit history are most important for a good score and how you can use them to get your score back on track.

4. How to Get Your Free Credit Report

Your credit report is used to generate your credit score and is also used by lenders to determine how much of a credit risk you are. Your credit history is important, so you should be sure to check it annually to make sure there are no errors and everything looks as it should. The good news is that you're entitled to a free credit report each year from each of the three main credit bureaus. Find out how you can get your own free credit report today.

5. Find Money to Pay Off Debt

When money is tight it probably seems like there is nothing left to put towards that lingering credit card debt. Even if you feel like you're living paycheck to paycheck there is money in your budget that can be used to accelerate those debt payments. Find out how you can spot hidden money that can help get your debt paid off even sooner.

6. Making More Than the Minimum Payment

Did you know that if you're only making the minimum payment on your credit cards that it could take you over a ten years to pay them off and rack up thousands in unnecessary interest charges? One of the first things you can do to improve your debt situation is to break the minimum payment habit. The minimum payment usually only covers finance charges plus a very small portion of the principal. This combination leads to years of unpaid debt and tremendous interest. If you can break the minimum payment habit and apply just a little extra to your monthly credit card bills you can become debt free in a fraction of the time.

7. Seeking Help for Spending and Debt Problems

Overspending can be a serious problem, and it isn't your fault. There are people out there who can help. Debtors Anonymous is a non-profit organization that can assist you with getting your spending under control. If you can't stop the impulse to buy and continue driving yourself further into debt, it can be worth it to talk to someone. Learn where you can go for help and get your spending under control.
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