How to Use the Debt Snowball Method to Guard Your Credit

If you have let your debt snowball out of control, then you will probably need to make use of an effective and proven method of paying it down like the Snowball Method. This method of liquidating debt was originally conceived of and made famous by personal finance guru and radio talk show host Dave Ramsey.

According to this model, it is the momentum not the math that makes it easier to pay down your debt.

Pay Down Your Tiniest Debt First

The way that you do this in practice is to list out all of your credit card debts according to the amount owed. You begin by first paying down your tiniest debt, then move up to the next smallest one, paying them off one by one. Keep moving up the credit card size ladder until they are all paid off.

The key is that these early and easy to achieve small wins will not only build your confidence but will give the necessary momentum to attack the larger piles of debt towards the end.

Pay Down the Highest Interest Rate Accounts First

It is the opposite of the debt avalanche model of attacking debt by paying down the highest interest rate accounts first, then moving down the interest rate credit card ladder until they are all paid down. While the Debt Snowball may be easier to follow, without a doubt the debt avalanche method saves you money in the long run and pays the debt off faster. The reason is because by paying down the card with the greatest interest rate later, you let it sit and continue accruing interest. 

This means that you will pay back a small fortune in interest using the Debt Snowball method. 

Pay More – Not Only the Monthly Minimum

If you do opt to use the Debt Snowball method, your goal should be to pay not only the minimum monthly payment on this smallest balance account, but also an additional $100 per month. Then when you finish paying down the first debt, add the minimum monthly payment you were making to the hundred dollars and apply this towards the next smallest debt. 

In every case, you should always make all minimum payments on all accounts during the process, or you will destroy your payment history on your credit report. Remember that this is the single most important category, and you should defend your timely monthly payment history with every breath in your body. 

How to Avoid Credit Collection Scams

Many lenders and creditors rely on third party companies in the debt collection business to go after delinquent accounts. Credit card companies use debt collectors like these to pursue charged off accounts all the time.

Many debt collectors who call on the phone are legitimate, but there are also scammers posing as collectors who will try to trick you out of money on debt that either does not exist or that has been cancelled or paid off. There are several things to watch for in avoiding such creditor collection scams. 

Beware especially any so-called debt collector who asks that you pay them with either a wire transfer or some other method that is non-traceable. 

Any legitimate debt collector is sure to accept a range of commonly accepted payments like credit cards, debit cards, or checks. Many nowadays even have online portals on which you can make a payment directly from their website. 

Any party asking you to pay by a non-traceable method is highly suspect. These payments that can not be traced are difficult to recover, even with the help of the appropriate authorities. 

Another thing to be careful of is when you do not recognize either the account or the creditor involved. In cases where you are positive that you never possessed an account with a company, the chances are high that it is actually a scam. 

You should not ever pay off a collection that you do not recognize. Federal rights allow you to demand proof of a debt before you send a debt collector any payment. 

The collection company must furnish you with not only proof of the past due debt, but also authorization that they are the ones to collect it. This can be important as many scammers today have gained information about old accounts which consumers actually had and are utilizing such data to trick them out of money. 

A faster way to check on a charged off debt is to pull your credit report. Unless the debt account is more than seven years old (at which point it will drop off) it will be there. 

How to Repair Your Credit If Your Identity Has Been Stolen

The most important thing with repairing your credit report after your identity has been stolen is to move fast and with patience. The quicker you are able to find and dispute fraud, the easier it will be to have them removed. 

The first thing that you should do is call the credit bureaus and request an immediate freeze on your credit. This will prevent any fraudsters from opening additional accounts. 

You should make an unabridged list of all fraudulent accounts. After you have this, go through the steps to dispute each account error on all three of your reports. These mistakes have to be separately reported one by one up to the point that they are all fixed.

Trying to report multiple fraudulent errors at one time could cause them to miss some of your disputes. You ought to also write letters of dispute for every fraudulent entry and mail them in. Describe the fraud that has occurred in your letters. 

It is imperative that you send the letters using certified mail too. This gives you tracking numbers on when everything is received. Be sure to keep a log of all of your phone calls along with records of electronic and written correspondence. Notes about content and dates of conversations are important to have. 

Finally, you should also contact the financial institutions involved directly so that they are aware that there is fraud on your accounts. Do this in writing to fill them in, as you did with the credit reporting bureaus. Send along copies of the police reports and any other documentation that you have as well. 

Be aware that this takes time to work through these fraudulent mistakes on your credit reports. It will require persistence and patience to get all of these accounts that are fraudulent removed from your credit report. The more of them that there are the longer it will take. 

How Do I Dispute My Credit Report Online?

Disputing information on your credit report online is the fastest way to accomplish this task. If you find something that is incorrect or incomplete while reviewing your credit reports, you can file directly with the credit reporting bureau that has the inaccurate information. Doing so requires that you go to:

According to TransUnion. It requires only minutes of your time and it is completely free to dispute any false items on your reports. You could also call the bureaus or write them to dispute incorrect information, but this would be considerably slower. 

Equifax gives the steps to filing a dispute online. You start by checking your credit report to find any incomplete or inaccurate information. Should you see any information that needs to be corrected, you then click the options on the applicable credit reporting bureau to file a dispute. 

The three credit bureaus claim that they will start investigating the matter immediately. Despite this urgency, it can take them up to 30 days to complete the investigation and to get back with you. The good news is that if the bureau(s) find any information that should be corrected or updated, they will take care of the updates for you. 

Equifax also suggests if you find information from a creditor or lender that is false or incomplete then you contact the lender or creditor who issued your account directly. Doing so may speed up the process of getting the information corrected when the credit bureau contacts the creditor or lender to verify the information.

The bureaus will attempt to update any information on your report from the data you supply them. If it involves material that has been submitted by a third party lender or creditor though, the credit bureau will have to investigate it with them directly. 

What is Credit Monitoring?

Credit monitoring services are commercial endeavors that charge a fee to watch over your credit reports. They alert you if they discover any changes to your accounts (or new accounts) detailed in your credit report. If another individual attempts to utilize your data to open a new credit account, the service will tell you immediately (so that you do not wait to discover the damage for months of even years). They can send out these alert messages via text message, email, or phone calls. 

Credit monitoring services charge prices ranging from $9.99 to $29.99 per month. It is important for you to understand what you are receiving before you commit to these fees. 

Be especially wary about offers for free credit monitoring. 

Because of several major data breaches that occurred in recent years, you may be eligible to receive free credit monitoring. Equifax suffered a massive breach in 2017, and Capital One did as well in 2019. Equifax provides four years of free credit monitoring (from all three major credit reporting bureaus) to anyone who was impacted by this. 

You can take advantage of it by signing up before January 22, 2020. Capital One notified all Americans whose Social Security numbers were stolen. If you were affected, they provide you with two years of free credit monitoring services (as well as identity protection) via TransUnion. 

If you were not awarded free credit monitoring by the data breaches, you can always buy the service on your own. Make certain you understand all services that are included, your rights (and windows) for cancellation, and what rights you have should the service fail to protect you. 

You can also take the most important step to protect yourself without paying for credit monitoring. Anyone may obtain a credit freeze by calling the credit reporting bureaus. 

Analysts call such a freeze the strongest type of protection from identity theft that will keep them from accessing your credit (without having specific permission).