When financial troubles occur, many Arkansas residents are concerned about the damage done to their credit standing. Paying bills late and allowing balances to rise will have a negative impact on one’s credit score, and the longer that financial difficulties continue, the more pronounced that damage will become. For consumers who are concerned about bad credit scores, the following tips may help structure a repayment plan that can help.
The first step in addressing credit issues is to gain an understanding of the full range of debts owed. This means gathering current account balances on all lines of credit, and separating accounts based on certain criteria. Those accounts that are secured by some form of real or personal property should be in one category, and other debts should be ranked in order of interest rate, from highest to lowest.
Consumers should always make it a priority to remain in good standing on all secured debts. This is due to the fact that falling behind on such accounts can lead to the seizure of the assets that secure the line of credit. Being subjected to a foreclosure or car repossession will often lead to a new range of debt issues and should be avoided whenever possible.
Next, attack those accounts that have the highest interest rate. By aggressively paying these accounts down, a significant amount can be saved on interest charges over time. Student loan debt should come next, and if it is not possible to stay current on those payments, individuals should contact the lender to research payment relief options. Finally, accounts with low interest rates should be tackled according to the amount of money owed, from most to least.
By taking a proactive approach, many Arkansas residents will be able to gain control over their debt issues and avoid bad credit. However, there are certain scenarios in which repayment is nearly impossible. For those who are unable to repay their debts through the method mentioned here, it may be worthwhile to consider if consumer bankruptcy is a faster and more effective way to eliminate debt and start anew.
Source: 9and10news.com, “Prioritize your debts to pay off bills the smart way“, Andrew Housser, June 1, 2015