How to Get Out of Debt and Increase Your Credit Score in 2021

RALEIGH (WTVD) – The COVID-19 pandemic continues to cause financial grief in the New Year. If your hope is to improve your finances and increase your savings, the Better Business Bureau has some tips to help you get out of debt.

The New Year is always a good time to assess your finances. One of the first things you can do is take a look at your credit cards.

Credit cards are known for their high interest rates, which can cost a lot of money over time. The BBB suggests that you see if you can use a balance transfer offer to switch to a card with a lower rate. Do your research on the BBB website first. Across the country, consumers filed more than 8,933 complaints against credit card companies in 2019. Make sure you read the terms and contract very carefully, as there can be hefty penalties if you miss one. payment. If you have multiple cards, decide which debt repayment strategy is right for you.

SEE ALSO | How a couple got out of $ 50,000 in credit card debt

There are many free tools available to help you increase your credit score.

The BBB offers this free debt solution tool to find options to manage your debt. Another great tool to help your credit score is to review programs offered by the big three credit bureaus, including Experience boost.

The most important thing to remember is not to get ripped off by the promises of debt relief from debt relief companies.

SEE ALSO | How a Texas couple forgave over $ 100,000 in debt in 2 years

“It’s actually illegal in North Carolina to charge upfront fees for debt collection services, so that’s a huge red flag. Also, know if they’re out of state, if they are. are often, they don’t make it known in state laws and that can also be a red flag, ”adds Alyssa Parker of the BBB.

Another red flag to watch out for when it comes to debt relief scams is if the company tells you to cut off all communication with your creditor and only make payments to the debt relief company. the debt.

Here are some other warning signs of BBB debt relief scams:

  • A debt relief company charges upfront fees before settling debts.
  • The company guarantees that it can eliminate your debt or reduce it by a particular amount within a specified time.
  • The company advises you to cut off communication with creditors.
  • The company will not send you information about its services unless you provide financial information such as credit card account numbers and balances.
  • To get your debt under control, the BBB suggests trying the following instead:

    Contact your creditors to discuss your repayment options. Most companies are willing to make special arrangements to help. Be realistic about how quickly you’ll be able to repay what you owe before agreeing to a payment plan.

    Talk to a nonprofit credit counselor. If you’re having trouble staying on a budget or can’t work out a repayment plan, consider reaching out to a credit counseling service. Find a nonprofit accredited credit counselor in your area by contacting the National Foundation for Credit Counseling at 1-800-388-2227 or

    SEE ALSO | Debt collection scams on the rise during the COVID-19 pandemic

    Consider a debt management plan if recommended by a nonprofit credit counselor. In a debt management plan, you deposit money each month with the credit counseling agency. The organization then uses this money to pay your bills according to a payment schedule that the advisor works out with you and your creditors. Your creditors may agree to lower interest rates or waive certain fees, but check with them to confirm these offers. You may need to agree not to request or use additional credit while you are in the plan.

    The fees that credit counselors can charge to set up and administer a debt management plan are limited by North Carolina law. Credit counselors cannot charge more than $ 40 to set up a debt management plan, and counselors can charge a monthly administration fee of no more than 10% of the monthly payment, up to a maximum of $ 40 per month. month.

    Consider contacting a local bankruptcy lawyer if your debt situation is particularly difficult.

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    About Sharon Joseph

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