My Way Credit

I mentioned briefly in an earlier post that for me the first step to eventually getting out of debt, repairing my credit and attaining my goal of financial stability was to make a list of everything I owed and everything I had coming in. I want to write more about that because I feel it is absolutely necessary in order to have any hope of eliminating debt and repairing credit.

I made an Excel spreadsheet of all my debts. I entered all of my credit card bills and loan balances as well as their monthly minimum payments, interest rates and the total remaining balance owed on each account. I totaled up the minimum monthly payments and the balances.

I entered my monthly fixed costs. Rent, utilities, food, gas, all the expenses I had to pay each month. I also added in my non-essential spending. Everything else that I spent money on during a typical month. If you are not sure exactly how much you spend each month, you need to figure it out. If you write down every dime you spend for a month or even a week you may be shocked. You will likely also find areas where you can easily save yourself some money without much effort. When I saw it all there in laid out in front of me, I felt a twinge of discouragement. I did not panic. I recognized it as a necessary part of the process of resolving this issue hanging over my head so I worked through it.

Now I had a complete picture of what I owed and what I spent. It was time to write down what I had for income. The answer turned out to be not enough unfortunately. So I went about asking myself how I could increase my available cash. I asked for and received a little help from a relative. I had a few things I thought I could sell on eBay. I had a little money sitting in a savings account. After much consideration, it did not make any sense to be getting such low interest on my savings and paying such high interest on my credit card debt so I figured I would use that. With everything I was able to scrape together, I had enough to get the collectors off my back and stop the phone from ringing non stop, but I needed to do more.

At that point, there was clearly no way I was going to pay off all my debt any time soon so I had to come up with a strategy for repayment. Some people try to pay off their debt with the highest interest rate first. I elected to go after the smallest balance first instead, making just the minimums on the other accounts. If I was going to devote so much effort to getting out of debt I needed the psychological lift that would come when a balance was zeroed out. I would then move on to the next debt, adding in what I had been paying to the now zero balance account to my next target, and continue up the ladder that way.

I also decided right then and there that I needed a second source of income as part of my repayment plan. If that meant finding a part time job then that is what I would do. A second source of income would also allow me to save a little as well. This was important to me, because I’d been living paycheck to paycheck for a long time. I no longer wanted to be one unforeseen or emergency expense away from sinking back into a pattern of missed payments and out of control debt.

Writing down my discretionary spending made it easy to identify a couple of areas where I could immediately save some money to use toward my repayment strategy. For example, I realized I was spending about $100 a month combined on coffees and magazines. That stopped right away and the extra money went toward my balances. I didn’t give up every non-essential purchase, but I did make a concious effort to cut out luxuries and shop for bargains.

I also vowed there would be no more missed due dates and no more late fees. My plan included a schedule I was determined to stick to. I set up automatic payments online where I could and set reminders on my calendar.

The strategy I came up with for myself required patience, time, a little sacrifice and a lot of effort. Staying on track was and still is the hardest part. I am not completely out of debt yet, but I am getting there. The steadily decreasing balances keep me motivated. I actually look forward to getting my statements now and seeing my progress.

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Got up and out the door a little earlier than usual today. Stopped off at the post office this morning on the way to work. One letter, cerified mail return receipt requested, to each of the three nationwide credit bureaus. I was going to take care of it on my lunch hour, but I ended up having some time before work which is a rare enough occurrence so I figured why not just get it out of the way. There is a post office on my way to work and out the dispute letters went. I do not expect to see any results for a few weeks, but through a little do it yourself credit repair I am now one step closer to getting my bad credit reports cleaned up a little and seeing some improvement in my credit scores. I am still carrying more debt than I would like and in a lot of ways I am still just getting started, but it feels good anyway.

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My first round of credit report dispute letters are finally done. I have written letters to all three of the major credit bureaus requesting that they delete all of the innaccurate personal information from my credit reports. This will not do anything to raise my credit scores or repair my bad credit. It is merely the first step in ensuring that all of the data on my credit report is up to date and correct. I will be mailing out my letters tomorrow morning via certified mail with a return receipt requested. All of my credit reporting agency communications will be sent this way for record keeping purposes and to make sure that my requests are being received and acted upon.

Once I have the return receipts, I will turn my attention toward disputing the innaccuracies in my credit history. I know that credit repair is a slow and involved process that I just started, but I wish I could fast forward to the day when all of the back and forth with consumer reporting agencies is over and my credit reports are updated and my credit scores are improved. It does not work that way though, but at least I know I am going to get there eventually now that I have set the plan into motion.

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