Millions of Americans struggle with managing their finances. Credit card debt, student debt, and car loans are all common sources of debt that take time and effort to pay off. Qualifying for a mortgage can seem daunting, especially growing your savings for a down payment.
Understanding your credit score and sources of debt are first steps to achieve financial stability. Setting achievable goals, staying positive and keeping your eye on the big picture will help you reach your ideal financial state.
1. Understand your Credit Score
You can to receive your credit score free of charge from each of the major credit bureaus – Equifax, TransUnion and Experian – once a year. Review your report and ensure there are no errors. Contact the reporting credit bureau to have any errors removed. Your credit report can give you a better understanding of what rate and loan product you may qualify for. If it’s lower than expected, work on improving your credit score as soon as possible.
2. Identify Your Problem Areas
Do you overspend on daily coffee, eating out or entertainment? Are you budgeting correctly? Do you have student loan or car debt? Figure out which problems are hurting your finances and start planning a solution. Paying off your car loans or credit card debt is a good first step. If possible, call your credit card company and request a lower interest rate. If you’ve consistently paid on time, many credit card companies will reduce your rate.
3. Prioritize Debt Pay-off
Not all debt is created equal. Mortgage loan and student loan debt is considered “good debt” because they position individuals towards greater net worth. Evaluate your debt and start paying debts with the highest interest rates, like unsecured credit cards. Prioritize your car loan next, which is not viewed as good debt.
4. Cut Back
What are you spending money on each day, week, month that could be used toward paying off debt? Consider cutting back on entertainment and eating out to start saving money. Pack your lunch for work and make your own coffee in the morning. Commit to creating a savings plan or retirement account, putting a set amount into these accounts each month.
5. Set Goals
Stay positive and understand the big picture. If your goal is to qualify for a mortgage loan, create smaller goals (like save $100 a month for down payment, decrease debt by 10% and increase credit score by 10 points). Set each goal to a timeline and work up to the big one.
Use these tips to set yourself up for a more stable financial portfolio. Feel free to call a trusted vLoan mortgage advisors at 1-844-77-vLoan to plan your future goals and determine what will work best for you.