An annual check on your financial health is imperative to see where you stand if you are planning to make big purchases, such as a house or a car. Even if you aren’t planning to make any large purchases that would require a good credit score, it is always good to have an idea of what your profile looks like and where you can make it better. It is also important to make sure that you haven’t been compromised.
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Annual Credit Report
Everybody can get a credit report annually for free now, which is a huge bonus! Especially since we used to have to pay for them if we wanted a check on our financial health. Pulling this report will actually warrant you 3 reports from the largest credit reporting agencies: Equifax, TransUnion and Experian.
Please note that all 3 reports may have slightly different results. It is a great thing to be able to see all 3 of them just to make sure that everything looks correct. Some of us, especially women, will have multiple names due to marriage, or divorce. Therefore, the names that you see should certainly be checked!
One of the other major things on these reports are your current and past addresses. Check those for accuracy because I personally found some of them to be incorrect. If you find incorrect information, you can submit a dispute and they will look into it.
You will not get your credit score with the annual credit report as you have to pay for that. However, most major credit cards will give you your credit score regularly now. Therefore, I would check with your credit card company for your credit score quarterly. That way you can monitor any major shifts that may have occurred and correct them before they get out of control.
Related Read: 5 ways to increase your credit score
Once you pull the credit report, you will be able to see all of the creditors, past and present, that they say you owed or still owe. The report will also list for each creditor whether or not you paid, or are paying, on time or are delinquent. This is VERY important information to have at your disposal.
I just helped a close personal friend pull his credit report and he were shocked to learn what was on it. Unfortunately for him, he was unaware that his ex spouse had wracked up some major debt while they were married and that none of it had been paid on in over a year! This has now seriously hurt his credit score. He was devastated when he found this all out, but since then has contacted each and every creditor and worked out a repayment plan to get out of delinquency.
His road will be long and hard to restore his credit, but I have helped devise a plan for him to knock it out as soon as possible. I chose the snowball method for him, as opposed to the avalanche method (which I personally like, but I’m a numbers person) because he is more of a visual results person. Most people that I know have much better long term results when they can see some more immediate progress, which is why I chose this method for him to use. Whichever method you choose, just make sure that it works best for your personality type and long term success and remember that there’s an app for that!
If you have credit cards and are working on creating more financial fitness, then you definitely need to see what your report says about those. If you have current debt, I would suggest stopping the use of all credit cards at once so that you don’t wrack up more debt against your credit. Until you get back to a place of homeostasis with your credit, those are the first things to go.
Start using cash for everything that you can as opposed to credit cards. It is much too easy to spend more frivolously with plastic in hand than it is when you physically have to divvy out the cash. I have found that when I pay for things with cash, I am much more cognizant of what I am spending. This will make it easier for you to begin to pay off those high balance credit cards.
Check out how Grayson paid off over $50,000 of credit card debt.
Once you see exactly how much debt you have, then creating a budget is the next step. Decide which method of paying off your debt you are going to use, and possibly download one of the apps to try. Next figure out exactly how much disposable income you have a month to pay on your debt. After you have taken a look at the amount of income versus current debt, you should easily be able to figure out how long it will take you to pay it all off.
I always suggest the most aggressive route of payment that you can possibly afford because it is so much more satisfying to be out of debt than still in it. This means sacrificing some of the things you like to do for fun, sometimes for quite some time, while you are busting your butt to pay off the debt. Keep at least one thing that you enjoy doing or spending your money on, as long as it is fairly cheap, because if you cut out all of your little joys then it is much easier to fall off of the financial freedom wagon due to resentment. Add that small pleasure into your monthly budget before you decide how much you are throwing at your debt.
Once you have your budget down, stick to it like glue! Don’t give up because YOU WILL get yourself out of debt. It just takes time, diligence and persistence.
What are some of the ways that you check your financial health regularly? Have you tried any of the apps to get out of debt? If so, which one was your favorite and why?
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