The top things to be aware of as you work to get out of debt.
Do I really need a budget? Yes, without a budget you will never know how you are progressing. A budget also helps you to plan ahead and stay within your income. As you progress, a solid budget will allow you to plan a way to save, pay of debt and manage everyday decision much easier.
I use credit cards for the cashback or points, isn't that making me money? Technically, when using a credit card correctly, it is a major convenience tool and a way to gain rewards but you have to be disciplined to pay your balance off completely each month for it to work. If you are in debt, then you most likely owe on your credit cards, which means you are paying more in interests than any cashback or reward is giving you.
I owe so much to credit cards, why should I bother? No matter how much you owe, you can always find a plan to pay off your debt. It may take time but inform your creditors and they can work with you.
Why is my credit score so important, my score is already bad what difference does it make if it gets worse? Your credit is your gateway to getting loans and borrowing money at favorable interest rates. Many employers will also look at your credit during a hiring process. Over time you can improve your credit no matter where you start or how bad you think it is. Consider the difference between a person with good credit and one with bad getting an auto loan for $15,000. The difference in interest rates may be more than $5,000 for someone without good credit plus they may face not getting approval from many lenders.
How can I look up my credit report and score? You are allowed a free annual credit report from each of the three credit bureaus: Transunion, Equifax, and Experian. You can go online to www.annualcreditreport.com for each report - you can space them apart over the year to get a report every few months to stay on top of your credit. You will still need to pay for your credit score but this site is the only true free site available with no hidden fees or memberships.
I've heard there is a new credit score, what is it? The traditional credit scores we are most used to is the FICO score which goes up to 850. The new VantageScore is out of 990. They are scored in similar fashion but using different categories to achieve your score. Typically, but not always, your VantageScore multiplied by 0.86 will equal your FICO score. They are looked at by different lenders but ultimately your goal is to get the best score by paying down debt. It is unlikely that one will help you receive a huge favorable difference over the other.
I've never lived with a budget, I don't know if I can do it? Yes, creating a budget is not to control your life but for you to control what you really want to do. A budget will help you reach your financial goals. It is never too late to start.