Strategies to improve your credit and reduce your debt
By Terrilyn Moore
Let’s face it, home ownership comes with additional costs such as property taxes and renovations. The burden of debt can be stressful, so take advantage of these helpful debt reduction strategies right away and start sleeping better at night!
First, managing credit card debt and re-establishing good credit habits
The best way to settle credit card debt is to start off small. Start to make the minimum payments on your credit cards with high interest rates and then maximize payments on cards with low interest rates.
“When helping to rebuild clients’ credit scores, I remind them to always pay your credit card on time, all the time. Don’t go over 50% of your limit”, Terrilyn Moore, Mortgage Broker, YourMortgageYourWay.ca. “Use it, pay it, use it, pay it…”
Five tips to re-establishing good credit habits:
1. Obtain a copy of your credit report to find out where you stand
2. Reduce the amount of debt you owe to improve your debt to income ratio
3. Set up automatic bill payments from your account to ensure you never miss a due date
4. Be sure to pay more than the minimum amount required and pay smaller, more frequent payments
5. Keep all your balances to a minimum. Racking up big debt can impact your score, even if you pay your bills on time
Once you re-establish good credit habits, you’ll be able to access better financial products at a lower interest rate.
Want to know more about what affects your credit rating and how can you improve it? Read this Global News article. http://globalnews.ca/news/1858868/what-affects-your-credit-rating-and-how-you-can-improve-it/
Second, hire a professional to help you consolidate debt
The goal of a credit card consolidation loan would be to make frequent payments at a set amount each month to pay off the credit card debt. When you make a decision about not only your mortgage but any of your financial needs make sure it is SMART – based on an educated and informed decision.
Each individual has different goals in their mortgage lifetime. Some people want to pay off their home as soon as possible and others just want to make a minimal payment:
- If your goal is to pay off your mortgage as soon as possible there are things that you can do to help you along the way. For example, if you change your payment options and tweak your amortization you can shave years off of your total mortgage lifetime and save thousands of dollars in interest.
- If your goal is to create some cash flow, you can use the equity in your home. For example, you can save approximately $12,000.00 per year in interest alone just by consolidating. This could be $60,000.00 in 5 years. (information based on a $300,000.00 mortgage consolidating approximately $60,000.00 in debts and lowering interest rate by approximately 1.25% per year).
Here is a Client Success Story to explain the details:
Joe and Kathy (aliases to protect client identity) they were in a challenging financial situation. They had a mortgage of $147,599.73 with a five-year term @ 4.55% with 3 ½ years left in their term and credit card balances totaling $108,200.00. They were tired of paying high interest credit card monthly payments and they felt like they were never saving any money. We came up with a solution that cost less, and helped them save more.
Dealing with debt can be overwhelming. The first step to financial freedom is to schedule a mortgage checkup.
Give us a call or visit yourmortgageyourway.ca