Back in January, I posted Changing Money Strategies, a post that was out of my comfort zone at the time. Since then, I’ve made some significant shifts that have helped me to improve my credit score and reduce my debt load. Being that many healers have hang-ups about financial issues and “net worth,” I felt it may be helpful to share what I’ve learned.
New Mental Outlook: Helpful and not Initially Required
Prior to the work I did leading up to the “Changing Money Strategies” post, I believed that I did not have enough money. It was a constant thought process on my mind. In making the shifts that I outlined, I now feel far more comfortable with my income and how I choose to spend it. It is in our discomfort and fear that we make choices based in fear. When our minds and hearts are open, we can make choices that are more aligned with our big- and small-picture desires.
Consider a Personal Loan for Debt Consolidation – even at a high interest rate. Here’s why:
Taking out a personal loan to consolidate my debt was one of the best choices I could have made. While the interest rate was high, and caused a lump in my throat at 16.99%, it was still lower than the ones on the credit cards. In moving the debt from the higher interest cards and to the personal loan, I lowered the amount of money that was being paid to the lender while paying more to the principal. An additional bonus, which I did not expect (again, I was non-financially minded) was that this also helped to improve my credit score tremendously and nearly overnight.
Credit Score Factors
When credit bureaus calculate your credit score, they use several factors. One involves the percentage of credit utilization on credit cards. Basically, we get “dinged” harder for credit on cards versus on loans because the higher the amount of money on credit cards, the lower your credit score.
Credit Bureaus also look at the percentage of your available credit that you are actually using. After I found this out, I left my credit card accounts open instead of closing them. This helped to bump my score up, too. Note: This can be tricky! The temptation may be to use your cards, so if you know you’ll just run up the credit again – it may be best to close the accounts as you pay them off.
With these strategies, my credit score rose 76 points between December 2017 and February 2018, just by shifting the majority of my debt from the credit cards to the personal loan. Seven months later and my credit score has risen by 117 points, putting me in the “Good” category!
These shifts were very fruitful for me, as I am now approved for a new personal loan with a <6% interest rate (>10-percentage points less than the January loan), and with a lower monthly payment and a shorter term. Though my score may drop next month due to getting “dinged” by both a new loan and the credit checks, in the long-run this will help me to pay my debt down faster!
Personal Loan Payments: How & When
During the last 6 months, I also paid as much to my personal loan as I could each month; adding on extra funds when I had windfalls AND paying early when I could, too – as the interest accrued was reduced when I made earlier and larger payments.
While I still have a bit of time before I am “out of the woods,” I am in a much better place now financially than I was just half a year ago. Now, I am allowing myself to begin dreaming about home ownership again; it’s on my horizon at least – something I really wasn’t even able to think of just a few months back.
I’m hopeful that this information will help those of us who also struggle with the fears of financial burdens and decision-making. Prior to January, I was feeling helpless and hopeless. These shifts have been a game-changer!