Saving and Rebuilding Credit After a Debt Settlement
Completing a debt settlement program is an important step in improving your financial outlook. However, once the program is complete, you may be unsure of the next steps to take. After settling your debts, you will need to focus on two main goals. The first is saving money. Since much of your debt is paid off, you are in a good position to begin saving.
The second goal is to rebuild your credit. Debt settlement can have a negative affect on a person’s credit. The period that you spent struggling before enrolling in the program probably had a negative affect as well. To put yourself at a great financial advantage, you will need to improve your credit score.
How to Begin Saving After Debt Settlement
Instead of opening a regular savings account, you may want to consider opening a money market account or obtaining a Certificate of Deposit. A money market account is similar to a savings account, but will offer a higher interest rate. To open a money market account, you will usually need to make a deposit of at least $2,500. In addition to the high minimum balance, you will also be limited in the number of withdrawals you can make each month. Fortunately, if you decide to withdraw your savings from the account, you may do so penalty-free.
A Certificate of Deposit, or CD, is a deposit that you make for a specific term. CD’s also offer higher interest rates, but will usually penalize you for withdrawing your money early. CD’s are most suitable for consumers that have a long term savings plan, since they offer very limited flexibility.
Two Ways to Rebuild Credit
Once you’ve started saving, it’s time to think about your credit. To begin increasing your score, you will have to obtain new forms of credit. One of the easiest ways to do this is to apply for a gas card or a department store credit card. These credit cards are easier to get approved for, even with a damaged credit score. After opening one of these accounts, make sure to pay your bill on time and refrain from using over half of your available credit. After working so hard to pay off debt, you will not want to begin accumulating other large debts.
If your application is denied, apply for a secured or prepaid credit card. To use a prepaid credit card, you will have to load money into the account. Anytime you make a purchase, your account will be debited. These cards are easy to qualify for and are a great way to begin increasing your credit score.
Choosing to pay off debt is only the first step in becoming financially successful. To build financial security, you must also improve your credit score and build your savings. The sooner you begin working towards these goals, the more you will benefit. If you find yourself needing additional help, you may want to speak to a financial adviser or credit repair specialist that can help you along the way.
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