5 Personal debt management tips for good credit

Too often, Americans find themselves awash in debt. Whether its student loans, or credit card debt, the sad fact is credit chaos has a way of sneaking up on families. One day, you wake up and realize that you don’t have enough money to pay all your bills for the month and still buy groceries. Remember this old saying: “When you find yourself at the bottom of a hole, the first thing to do is STOP DIGGING.” Don’t wait until tomorrow to take immediate steps to remedy your ailing financial management habits. Waiting will only make things worse. Here are a few debt management tips that will help.

1. Orientation

Your journey toward solvency begins with knowing where you are. Like any other adventure, it isn’t enough to know where you want to be. You have to know your starting point. Get a credit check report. Once you have this in hand, you should go over the report carefully in order to find and correct any mistakes. Then, create a spreadsheet with full accounting of what you owe, what interest rates you’re paying, what monthly expenses you have, and what resources you have to pay for the whole thing. Be completely honest with yourself. Write down everything including that magazine subscription, your cell phone, and the cost of the latte you have every morning. Once you have the complete list, you will find that some expenses are glaringly non-essential. Remove them. It is important to create a budget you can live with, however. Remember that your car will need gas and windshield wipers and, you should include a line-item for the rainy day fund because no matter what, unexpected expenses have a way of cropping up. Your budget is your road map to good credit.

2. Communicate and Negotiate

When you’ve completed your budget, you may discover that by cutting just one or two of those coffee treats, you can manage just fine. Chances are, though, you may also discover that without serious changes, you might not be able to make minimum payments to your creditors. This calls for immediate communication with those creditors. Ignoring them or hiding from them won’t help. Instead, tell them what you plan to do about paying them. Tell them what you will pay and when. Be honest. Be forthright. They may appreciate your openness and might do what they can to work with you. Don’t be afraid to ask for a lower interest rate, either. They might say no, but you won’t know until you ask.

3. Consolidate

If you are wrestling with credit card debt, look to consolidate your debt under the card with the lowest interest rates and fees. Not only do you enjoy some savings, there is a great relief factor when you have to write only one check each month to a credit card company. Student loans and loans of other kinds can also be consolidated in order to shrink the list and, at least, make it appear smaller, which has its own rewards.

4. Prioritize

As you create your plan for eliminating debt, remember that paying the oldest debt off first is not always the best answer. Look at the fees and interest rates you’re paying as you create your plan. High interest loans and credit card debt should be tackled first, before you begin to whittle down your mortgage and government-sponsored student loans. As you “find” money in your budgeting process, apply those dollars toward your most burdensome debts.

5. Call in the Cavalry

You are not alone. There is lots of help available -- some of which is free. Visit with a local debt management firm or check online to find the many resources available to help you find the best way to manage your debt. These debt relief organizations are experts at re-establishing a good credit score and their expertise will give you some relief from collection calls.

Good credit is no accident. It requires work and sacrifice. When you discover how to manage your debt, you will be rewarded with better credit rating checks and the sense that you’ve defeated one of the most ominous foes you’ll ever encounter.

Joy Mali is an active blogger who is fond of writing articles on Bad Credit Loans to encourage people to manage and protect their credit. Follow her on Twitter to know more on things to teach kids about money management.