Getting a handle on various debt accounts and debt balances is essential for anybody looking to maintain a healthy credit history or boost their credit score. The more debt you have, the more they can affect your credit report and credit scores.
Some of the most common types of debt are:
- Credit card debt.
- Loan debt.
- Medical bills.
- Back taxes.
If you’re on a journey towards improving your credit, the first step is to find out all your debts. Once you know how much debt you owe, you can work toward curating a payment plan that works for your personal budget and lifestyle. But how do you find out all your debts?
How To Find Out All My Debts
To get an accurate depiction of how much debt you currently owe, you may try the following:
- Check bank statements and charges.
- Review credit card statements and charges.
- Check credit reports.
- Use a budgeting app.
Review Your Monthly Bank and Credit Card Billing Statements
The easiest way to review how you spend your money is to check your bank account and credit card statements. Your bank account statement contains all information regarding any automatic withdrawals and debit transactions from your checking and savings accounts. Your credit card statement contains all the information about any credit transactions or recurring payments you have connected to your card.
Try a Budgeting App
Instead of going through bills and statements on your own, you can also utilize the help of a budgeting app. These applications scan your financial statements and identify the subscriptions and automatic payments you have set up, what the current balance on your various loans are, and give you a consolidated report of how you spend your money.
These apps can even point out services you are currently paying for but are not necessarily using all the time, which can help you cut back on unnecessary spending. While these apps can be extremely helpful, keep in mind that they are paid services. Some popular budgeting apps you may consider are:
Check Your Free Credit Reports From One of the Three Major Credit Bureaus
You can also check your credit reports to view the various creditors to whom you owe money. A creditor, also called a lender, is a financial institution that lends money. Since your credit report is the official record of your credit history, it will contain all the information on when and where you spent or requested to spend money. Credit reports may even have more detailed information than your bank and credit card statements.
Besides checking your free report for more information on the amount you owe in debts, you can also use them to gauge your overall financial health. For example, if your credit report shows a sudden decline in your credit score, it may be a good idea to review your recent financial activity to see what caused the drop. Reviewing your reports regularly allows you to stay familiar with your financial habits and activities and adjust if necessary.
What Is a Credit Report?
A credit report is a collection of data regarding your various financial habits and behaviors. This data is collected by a financial reporting agency, also known as a credit bureau. The three major credit reporting agencies are TransUnion, Equifax, and Experian.
Your credit report lists data for the following financial categories:
- Payment history.
- Length of credit history.
- Credit mix.
- Hard credit checks.
- Amount of debt owed.
You can get a free copy of your credit report once a year from the major credit bureaus, or you can utilize a free service to see your unofficial report whenever you like. Visit the website of your bank or credit card issuer to see an unofficial credit report. Keep in mind that while these reports are not from one of the three main credit bureaus, they will still contain virtually the same information.
What Happens When You Don’t Pay Off Debt?
Failing to pay off debt can have detrimental consequences on your credit reports and overall financial health. Missing just one debt payment can negatively affect your credit score for up to seven years! Furthermore, if you keep missing payments, your debts will eventually fall into default. When you default on a loan, your debt is sent to debt collection agencies, who will then set up a collection account in your name.
A collection agency, also known as debt collectors, are a type of financial institution that purchases delinquent debts from an original creditor. The debt collection agency will then start contacting the delinquent Debtor to get them to pay back their debts. If you still refuse to pay back your debts once they are sent to a collections agency, the next step may be to file bankruptcy.
Filing for bankruptcy is a formal declaration stating that you no longer have money to pay off your debts and other financial responsibilities. Bankruptcy is a last resort option you should not turn to unless there are absolutely no other options available when it comes to paying off your debts.
Debt Settlement vs. Debt Consolidation When You Owe Money
If your debt has been sent to a debt collector, you may be wondering if debt settlement or debt consolidation is your best option. Debt settlement is when you work with a debt settlement company and negotiate a payoff amount with your various creditors. Settling debt may help you save money, but it can also have quite a negative effect on your credit score.
Debt consolidation is taking various existing debts and combining them all into one loan. Consolidating debt may take longer than debt settlement, but it may also have a much more positive effect on your credit score.
Ways To Pay off Debts
Below are a few ways you can work towards paying off your debt.
Debt Consolidation Loan
One of the fastest ways to get any old debts under control is to acquire a debt consolidation loan. There are many personal installment loans designed to help consumers pay off existing debt while also helping them build their credit scores. For example, these credit builder loans just might be the perfect financial solution you’ve been looking for!
However, before you commit to a loan, do a bit of research first. There are some lenders, like payday loan organizations, who claim to be convenient, fast cash options but just end up sticking consumers with high-interest rates and inconvenient terms.
Create a Payment Plan
If you want to pay off your debts individually instead of consolidating them into one loan, you may want to come up with a budget or payment plan. To create the best payment plan, first, calculate your gross monthly income. Your gross monthly income is the amount of money left over from your earnings after all your core expenses are taken care of. Once you have this amount, you can then determine how much extra money you can put towards your debt each week or each month.
Get an Additional Income Stream
What if you’ve calculated your gross monthly income and find that it is not enough to pay back your debts within your desired timeline? In that case, it may be time to acquire another stream of income. You can get more income by getting an additional job or selling items you no longer use around your home. If you have the time and the determination, you may want to do both!
Tips for Paying off Debt as Quickly as Possible
After you find out how much debt you owe, it is time to work towards getting that amount down. Check out the tips below for speeding up the process when it comes to paying off your debt.
Pay More Than Minimum Monthly Amount Due
You can pay off debts faster and save a significant amount on interest rate charges by paying more than your minimum amount due each month. Paying just $50 or $100 more than your minimum payment due can help you pay off debt months, if not years, sooner than your original expected payoff date.
Avoid Applying for New Credit
Do your best not to acquire more debt when trying to pay off your balances. If you need money, try dipping into your savings instead of applying with credit card companies. These times may also be a good chance to assess your wants vs. your needs. Were you looking to spend money to purchase something that you need to survive or just something you saw and desired on a whim?
Try Not To Use Credit Cards
While you certainly don’t want to apply for new credit cards, it may also be a good idea to stop spending on the credit you currently have as well, especially if you are trying to cut down your credit card debt.
To make this goal more accessible, try giving yourself a money savings challenge. For example, start by giving yourself a two-week timeline where you only spend money on necessities. You may find that during these 14 days, you are able to save a significant amount of money, which you can then put towards your existing debt!
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