What is the best way to get out of debt?

Question

I am a recent college grad. and during college I had a two credit cards and other small accounts. It has been 7 years now and I have heard that these accounts will be charged off in that amount of time but the creditors continue to send me "deals" to pay them off. Although I am working I do not have the extra money to pay that, student loans, etc. So I would like to know is it better to let these accounts be charged off or what? I would like to get my credit score up, but I make enought money to take care of the present not the past. What should I do?

Answer 1

Opt for a debt consolidation loan: The easiest method of getting a debt consolidation loan is to utilize the equity of your home. Equity of your home is calculated and determined by the difference in the amount you have paid and the amount you owe. If the amount you have paid is more than the amount due, you can use it as collateral. This allows you to borrow money on lower interest rates. Besides, you also get tax benefit on this type of loan. Consult your tax advisor before opting for this loan.

Use unsecured loans: If the equity in your home is not adequate or you do not own a home, go for an unsecured personal loan. These loans are more difficult to get, but once you are approved, you will benefit from the lower rate of interest with this type of consolidation loan.

Minimize the loan period: Nobody wants to spend their major part of life paying off the debt. Hence try to reduce the total debt. If you cannot, consolidate your loans. This is one of the ways of developing financial security. The other part of financial security is to handle your finances responsibly. Reduce the total amount of debt, pay more than the minimum each month and reduce the loan period are the best ways to get out of debt quickly.

Answer 2

You want to raise your score but you're asking if you should just not pay bills that you owe. I don't think not paying back money that you borrowed is going to raise your credit score anytime soon.

There is no rule that creditors charge things off after 7 years. In reality, you owe the money forever. Also, the original creditor can charge the bill off and still sell the debt to a collection agency, who can hound you forever. There is a Statute of Limitations which varies by state. That is the limit on time that a creditor or collection agency can file a lawsuit against you and get a judgment. If you're past the statute of limitations, that means they can no longer sue you. You still owe the money, they just can't get a judgment anymore. If they do decide to sue you, and get a judgment, they can then attach your bank accounts and in some states, garnish your wages.

Student Loans have no Statute of Limitations so you owe those forever.

If you want to raise your credit score, pay the bills. Right now, those are all sitting on your credit report in default. The only way to get your score up is to start making regular payments.

Additional point: If a creditor does charge a bill off, the IRS has ruled that that charge off is income to you. If they charge off a $5,000 debt, for example, you then have to declare that $5,000 as income on your taxes. If you don't and get audited, you don't even want to go where the IRS will take you. Being in debt to them is far worse then just paying the bills in the first place.

Answer 3

Pay just over the minimum amounts due on all the debts except the one with the lowest balance. Pay as much as you possibly can on the smallest debt. Once you get that one paid off, move the amount you were paying on it to the next smallest amount. Keep doing this until all the debts are paid.

As you pay off debt, your credit score will go up automatically.

And remember to put a little in savings, too! Even if it's just $20 a month.

Answer 4

I think a legal expert may have a better answer depnding upon the law of the land. From a layman perspective, I'd say that it will effect your overall credit rating. In future incase you need any loan or credit, you might face problems then.

These companies also offer flexible deals depending upon your income they may reduce the monthly installment to minimal that will be comfortable to your pocket.

I faced a similar situation, my income was not sufficient to meet the debt but with time my income got better and I found a way to pay them back. Although it was not immediate it did take a year or two to come back to normal.

If you have the intentions, you will find a way.

Answer 5

If you want to improve your credit score, DO NOT let the accounts be charged off.

My suggestions:

o Talk to the creditors. If you work with them in good faith, most will work with you to develop a reasonable schedule to pay off your debt.

o Look really hard at your current expenses. Divide them in to mandatory (example: food) and discretionary (eating out, cable, internet, gym membership, etc.). Cut out the discretionary for awhile, even if it's painful.

o Get a second job temporarily.

o If you're single, live with your parents until things are under control or get one or more roommates to share expenses.

In a nutshell, to get out of debt, you must increase income or reduce expenses, along with working out a re-payment plan with your creditors.

Answer 6

Live like a poor college student for 5 years.

Student loans are good debt. Don't worry about those.

Keep saving your money.

Pay off your credit card debts. Cancel one because too many credit cards lowers your score.....

Why do you need better credit when you just said you want to get out of debt?

My advice: Get out of debt and stay out of it.

Some people get out of debt and find new ones. Which doesn't really make any sense.

Answer 7

this coming from a person up to her ears in debt, but the best and only way to stay out of debt is if you don't have cash to pay for something then don't buy it ! but that is easier said then done, heck with the gas prices and the cost of living you need two incomes to survive! I had excellent credit all of my life then all it takes is 1 accident at work and that all come crumbling down, it is like a snowball heading straight to hell. It is a damn shame when a person is worth more dead than alive!

Answer 8

Consolidating your credit card debt is accomplished by grouping together all your unsecured debt into one debt with one payment. There are agencies that can help you to consolidate your debt and they will negotiate for you with your creditors, often enabling you to pay less each month and even lowering your interest rates.

This solution can be perfect for those who are interested in reducing their payments and interest rates while increasing their credit standing.

When using a debt consolidation company you will also get free advice on budgeting and money management. This kind of service can prove invaluable to those who need it and they should take full advantage of it.
Read more key factors to consider when looking at a debt consolidation for taking care of your credit card debt at: http://www.credit-card-gallery.com/article/177,Consolidating_Your_Credit_Card_Debt

Answer 9

Umm, i'm exceedingly particular statue of obstacles purely protects you while commit against the regulation (Sorry approximately that) wager what 2 crimes it does no longer impression? Murdering somebody (for sure!) and not paying taxes... you nonetheless ought to pay your expenses. in case you're in debt, make the cheap, and make a checklist of each and every dime you spend. you will locate someplace the place funds is going that it would not must be.

Answer 10

Pay them off. Even if you make small payments, you'll be much better off. They will not charge them off. They'll continue to hound you and the amount will grow tremendously.

You should contact a credit counseling service and make arrangement to pay them off. That's is you want to repair your credit. They will not go away.