Money Saving Tips to Keep Debt Under Control

The path to financial freedom is often scattered with bumpy roads. No matter how hard you try, you may encounter difficult financial times at some point in your life. Credit cards, while a blessing to many, can wreak havoc on your credit score if not cared for properly. Some debt recovery agencies, like Wescot, can prove invaluable in getting your finances back in order. Connect with them through Pinterest or other social media to ensure you are back on track in no time. The best way to avoid financial downfall is to arm yourself with money-saving tools way ahead in the game.

Cut Yourself Off

If your debt has accumulated beyond plan, you may begin to feel trapped. This is not uncommon. Once you’ve realised that you’re in financial trouble, it’s time to put a plan into action to ensure it doesn’t further spin out of control. Commit to avoiding borrowing money until you get your finances in order. Cut up all of your credit cards, except for one for emergencies. Do it now. If that’s out of the question, simply store your cards in a glass of water and stick it in the freezer. The impulse to buy will more than likely pass by the time the ice melts. A bit silly, but it works. Ridding yourself of the temptation is the best way to begin your recovery when you’re far down the debt hole.

Don’t Make the Minimum

Did you know that a £5,000 balance can take over 30 years to pay off when making the minimum payment? Yes, really. Interest rates are ever rising, making cleaning up your financial messiness even more difficult. You must pay more than your card’s minimum payment if you want to settle your debts in an efficient manner. Pay as much as you possibly can per month in order to avoid sky-high interest. This is just one great way to avoid mounting debt.

Low interest rates are imperative to managing debt. Don’t be afraid to switch credit cards if it means re-negotiating interest rates. You may have become accustomed to tossing out credit card offers once they pile in, but consider applying for a 0% interest card and transferring your outstanding balances onto that account. This will give you a fresh start, free of interest, to get you back on track with your payments. It’s a lot simpler than it sounds.

Ignorance is bliss, but not when it comes to credit cards. It’s your responsibility to become familiar with the details of your card and how it works. From fees to interest rates and grace periods, there is much to learn about managing your card accounts. Arming yourself with knowledge is the best way to avoid a scare later on.

Stay Organised

Credit cards are one of modern man’s greatest creations for more reasons than one. Aside from protecting purchases, building credit and being able to purchase things without cash, owning a credit cards paves the way for learning the intricacies of finance. Whether you’re dealing with two credit cards or six, you must be aware of what is at stake. Keep a log of each card, your balance and the interest rate on hand, so you can plan as much as you need to. While a fantastic financial tool, credit cards can wreak havoc on your money, as well. When used improperly and too frequently, credit cards can function more like a high interest loan than a cash substitute.

Having your debts in one place may seem intimidating, but it’s much simpler than having several open tabs on your browser, which can get confusing quickly. Arrange your payment priorities by interest rates. In order to rid yourself of financial debt, pay off your credit cards with the highest rates, then follow with the rest in a descending order.

Prioritise Your Debts

According to financial guru Suze Orman, all debts are created equal. Don’t place favours on the back burner. Whether it’s Visa you are dealing with or the money your sister lent you, treat all your debts with the same importance, though be smart about which should be paid first. Cards with the highest interest rates and balances should be paid before the others.

So you’ve paid off your largest balance – great! Pat yourself on the back, but not for too long. There is still much to be done. It’s time to apply that same monthly payment to another credit card.

Once you’ve gotten yourself out of the financial hole we call debt, you must take steps to avoid a recurrence. Make a promise to yourself to always keep your finances in order. Aside from caring for your health, this is the best way to secure a bright future for you and your family. By budgeting and staying organised with your finances, your shots at future financial freedom drastically increase.

How to Restore Your Credit Rating

Without a good credit rating an individual’s financial options can be severely diminished. In such a situation, it can be difficult to secure a loan or buy anything which requires a payment schedule such as a house or car. Thankfully, there are steps which can be taken to improve any credit score markedly by knowing why credit ratings are important and how they can be affected through prudent finances.

Why a Bad Credit Rating Should Be Avoided

There are a number of reasons why a bad credit rating should be remedied as quickly as possible.

These include:

  1. Rent: If you have a bad credit rating and wish to rent a property, you may find difficulty in doing so. If your credit history is poor then a landlord may take this as evidence that as a potential tenant, you have a bad track record for paying your debts and may struggle with rent.
  2. Employment: Some jobs require a credit check before a person can be hired. This is most commonly found in upper management positions or jobs which require financial knowledge. A prospective employer may use a bad credit score as grounds to not hire someone as they could feel that such an individual does not have the skills to handle money or finances.
  3. Loans: If a person has a bad credit rating, it can be very difficult to get credit approval. This means that lines of credits such as bank loans or credit cards may be closed because lenders cannot be sure that such an individual would be able to pay them back.
  4. Stress: Having debt or being unable to secure new lines of credit can have a severe impact on a person’s well-being. It is for this reason above all others that you should try to improve your credit rating as quickly as possible.
  5. Future Purchases: For certain items such as a car or mobile phone, there is a strict credit checking process involved. If your credit rating is poor then you might be refused when looking to buy such a product.

Tips for Getting a Good Credit Rating

Dealing with a poor credit score can seem like an endless struggle, with little light at the end of tunnel. Thankfully, this impression is not in fact true. There are many things a person with a bad credit rating can do to improve their situation markedly. All you need to do is remain calm and approach the problem in a systematic way.

Approaches for improving a credit score include:

  1. Find Out Your Score: In order to improve your credit rating, you’ll need to know exactly what your score currently is. To do this, you’ll need to get a full credit report. There are a number of credit report compilers which will create an in-depth report for you at little cost. The report will show exactly what debts have been plaguing any credit rating and when payments might have been missed.
  2. Asses For Inaccuracies: It is quite common to find that there is a mistake on a credit score. In order to identify this, order a report from more than one company, then compare them. If any differences can be seen, then businesses are seeing an error when viewing one of the reports. Looking through each report, it is important to account for each late payment and debt attributed to you. If some are mistakes, then you should contact a credit reporting bureau to have the report amended. This can improve your credit rating markedly.
  3. Prompt Payment: The worst thing you can do is add to a bad credit rating by missing debt payments. Whether it is rent or for a TV package, these bills have to be paid on time and in full or your credit rating will get worse. Make sure that all bills are taken care of each month. If they cost too much, then contact a debt management advisor or cancel luxury payments you do not need to free up more money.
  4. Research: There are many approaches to increasing a credit rating. It’s essential for customers to expand their knowledge by visiting resources such as the Wescot debt blog, so that they can apply all available methods to their situation. This also lends a level of adaptability to the process where situation specific techniques can be learned and then used to greater effect.
  5. Increase Debt: This sounds like a strange piece of advice, but by taking on a new debt and then paying it back quickly your credit rating will improve. A great way to do this, for example, is to take out a very small loan and pay it back as quickly as possible. If your credit rating is particularly bad then you might have to secure it against something you own. This will show anyone looking at your credit rating in the future that you can pay your debt.
  6. High APR Credit Cards: If you can’t get access to a small loan and don’t want to go down the payday lending route, then getting a high APR credit card is a great idea, as long as you don’t spend too much on it. Many companies offer these cards with high interest, but if the limit is small then you can max it out and then pay it back quickly. Obviously, this should only be done if you have the funds to do so. Not only will this show that you can pay off debt, but just having a credit card will increase your credit rating, showing that companies are willing to give you a line of credit.

Improving a Credit Rating Takes Time

The important thing to remember about building a good credit score is that it takes time. It’s a process which requires consistency in paying bills and managing any debts. If this can be done, then slowly but surely, your credit rating will improve eventually to the point where you will once again have access to better lines of credit.

Experian reveals new data about credit conditions in its Q3 2014 report

Keeping up to date with the latest data on credit conditions is something which most financial organisations do – including Wescot, a credit services company, whom you can read more about here. Whilst finance experts like Wescot are well aware of developments in the credit arena, most consumers remain uninformed about such matters. This can often lead to confusion when they apply for loans or credit cards, and find that their applications have been turned down. But, as Experian’s Q3 2014 report revealed, many factors contribute to lending decisions, and these factors vary from one quarter to the next. Let’s take a closer look at this document now.

The report showed that whilst unsecured credit continued on its upward path, there was – for the first time in eight consecutive quarters – a weakening in secured lending to households. The information regarding the latter was taken from the quarterly CCS (Credit Conditions Survey) from the Bank of England, who conducted their survey between August 13th and September 8th of 2014.

The results of the Bank of England’s research were based on the responses made by lenders, and were calculated by assigning each lender a score, based on their selected response. The lenders who stated that conditions had changed slightly were given half the score of those who stated that conditions had changed significantly. The scores were then weighted, according to the market shares of each lender.

The availability of unsecured credit rose once again during this period of time, as did the demand for credit card loans. However, there was no notable increase in the demand for other forms of unsecured loans. The report predicted that both unsecured and secured lending to consumers would rise during the subsequent quarter, and that this trend would continue on into the following year.

In its report, Experian noted that the CCS showed a drop in the demand for mortgages; it has been said that this reduction was the result of the public taking a less favourable view of high-risk financial decisions. This drop in mortgage applications also coincided with a decline in the availability of mortgage credit; this was due in large part to the implementation of the MMR (Mortgage Market Review), which led to a number of operational issues for several lenders. In the survey, some lending firms also noted that their expectations regarding property prices were also a factor which had contributed to the reduction in availability.

A number of lenders added that they had chosen to restrict availability due to the FPC’s (Financial Policy Committee) recommendations that lenders should attempt to lessen the risks associated with the property market. They also stated that they were less eager to lend at LTV (loan to value) ratios of over 90%, and that the credit scoring criteria for mortgage applicants had become slightly stricter during this quarter. Lastly, many lenders said that they expected secured net lending to increase by 1.7% during the final quarter of the year, and by 2.2% in 2015.

The report indicated that lenders had a positive outlook for the final quarter, due to the fact that the third quarter saw the economy doing well, unemployment rates falling, and consumer confidence remaining high. However, their outlook for credit conditions beyond the next few months were slightly more pessimistic, with some citing political and economic uncertainty as reasons for a possible drop in the demand for credit in 2015. Although, as mentioned earlier, the economy has been strong, its growth is beginning to slow. Another issue which could result in consumers taking out fewer loans, is the lack of wage growth; this particular issue typically leads to little or no improvements in productivity, and could potentially pose a threat to the economy in the future.

There was an overall increase of £3 billion on unsecured lending between the months of July and September; this is a considerable amount, particularly when compared with the average of £2.3 billion over the previous two quarters. The annual growth rate for unsecured lending rose to 6.1%, a figure which hasn’t been seen in more than 8 years; however, this percentage still pales in comparison to the rates of 2005, which stood in the double digits.

Credit card lending was also shown to have risen, with its annual growth rate coming in at 4.7%, due to a £0.6 billion increase. According to the CCS, this rise in demand for credit card loans was the result of improvements in the economy, and the marketing campaigns implemented by lenders.

There were no changes seen in spreads on credit cards for the third quarter. The credit scoring criteria for consumers applying for unsecured loans also became slightly more lax, and default rates were the same as those reported in previous quarters. Credit card interest rates rose somewhat, although the increase was not significant, when compared with the second quarter, and the rates were in fact lower than those from the same period in 2013. Much like in the previous 12 months, personal loan interest rates remained unchanged.

Experian’s report explained that the CCS expected an expansion in overall net lending during the last three months of 2014, with the demand for both credit cards and other types of unsecured lending services likely to rise quite a bit; however, it also forecasted a rise in the rate of defaults on credit cards during the final quarter. The criteria used to score lending applications was expected to become quite lenient.