Canadian Credit FICO Score & Debt Consolidation Help

The option of debt consolidation can be a great alternative to going bankrupt. However, that scenario is not always possible. Unfortunately by the time people realize the need for debt consolidation exists, they have already harmed their credit or FICO score. Banks can be funny that way, and even though the only solution to declaring bankruptcy is to consolidate, they often would extend credit to you with a lowered credit or fico score. Are there alternatives to going bankrupt? Can debt be managed without a consolidation loan? Can I actually save money while getting out of debt? Possibly this can be achieved with some re budgeting techniques, and a true desire to get out of debt.

First off, do not avoid your creditors; this just pushes them to come after you more in most cases. What has worked me in the past is to always put something into savings. I mean we always manage to scrounge up enough change to make the minimum payment to our creditors, so why not make yourself your own creditor. Set a small, but manageable bill payment for yourself, and stick to it. Open up an account in another bank if necessary. Then list that in your budget.

There are many budget templates out there, such as http://office.microsoft.com/en-us/templates/TC062062791033.aspx from Microsoft. It’s easily downloaded and is very straight forward. Plug in your numbers (be honest!) and see where your money is going. Once you have a visual it is easier to decide where to cut back. Be prepared, this can be an eye opening experience.

Now, how to handle the debt:

List your creditors and there minimum payments (include yourself as a creditor). Now sort your list by balance from lowest to highest. Make your minimum payment for each creditor ON TIME each month (including yourself). Now, take any left over money (that you squeezed out of cut backs in your budget), and apply that cash to the creditor with the smallest balance. Continue this until the credit with the smallest balance is paid off. Once paid, continue as before, but now, that monthly payment that went to the smallest balance should be applied to the creditor with the next smallest balance (thus paying off this creditor faster). Continuing on in this fashion will get rid of your debt faster then just making monthly payment and arbitrarily sending extra payments to any creditor.

It is very important to make minimum payments on all the creditors while paying off the smallest balance though. This ensures your credit or FICO score stays good.

Be diligent, stead fast and determined. You CAN get out of this! Just remember, you are NOT Donald Trump, so stop spending like him! Adjust your lifestyle. Find cheaper was to have fun. Instead of going out, have friends in for a movie night. Throw a pot-luck, go for a picnic. There are many alternatives to spending money for leisure. Find them!

Good Luck and keep your head up!