Do you have more than $5,000 in credit card debt? If so, you're more likely earning over $70,000 per year1, as people who fall into this category rack up larger bills. No matter how much you earn or how large your credit card bill is though, you'll need to pay it all off one day. The sooner you do, the better it will be for your credit report, and your financial future.
However, when you have a large bill to clear, you might feel like you're fighting a losing battle. You don't know where to start, or whether the debt is going to affect your credit report over time. These five easy steps will set you on the right path to being debt free, and having a sound credit score.
1. Check your credit score
When you have debt, it's important to know if it will affect your credit score. If it is going to, you need to focus on paying it off sooner, otherwise it could leave lasting damage. The easiest way to check your credit score, and related credit report, is with My Credit File. We can have your detailed information with you quickly, so you won't be left waiting for vital information about your finances.
2. Calculate what you owe
Collect all of your unpaid credit card bills, and find the total you owe (splitting each of your credit card bills up)2. Once you have the figure in front of you, you'll know just how high the hill you have to climb is. For some, that's a relief.
3. Target one card, and budget to pay it off
Once you know what you owe, put together a weekly budget that includes money set aside for paying off one credit card at a time3. If you have three cards with debts, for example, you may only be able to afford to pay the minimum monthly repayment amount, and the debt could remain at the same point on each card, or even increase.
4. Deliver exactly what you budgeted for (or more)
Once you've laid out a budget, stick to it1. If you have more cash leftover at the end of a pay cycle, put it towards the debt as well. The greater the balance paid off, the less interest is levied on the debt.
5. Build a better financial future
Calculate how much you're saving in credit card repayments once your debt has been paid off, and put that into a separate account to build wealth. Once you've developed good saving habits, stick with them.
For more information about credit ratings and how to keep yours favourable, make sure you get in touch with My Credit File today.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.
1. MoneySmart. Get smart on credit card debt. Accessed November 2016.
2. Time. How do I get rid of my credit card debt? Accessed November 2016.
3. Real Simple. How to eliminate credit card debt. Accessed November 2016.