If your debt ends up in collections, it means that the original creditor has relinquished the account to collectors so it can recoup its loss. While a collector can be downright annoying, it is in your best interest to not ignore their letters or calls. Here is why:

1. Debts Stay on Your Credit Report for 7 Years

When a debt falls into collection, it will affect your credit score for 7 years. After 7 years, the obligation drops off the report and the score can begin to climb. However, who can really afford being debilitated this way for so long?

2. It is Difficult to Apply for New Credit

Ignoring unpaid debts also makes it difficult for you to apply for new credit. After all, would you extend credit to someone who still has some lingering obligations? You need to put yourself in the creditor’s shoes if you want to learn how to get out of debt. If you are able to secure credit while in debt, you will have to pay a higher rate of interest. This is because your debt represents an added risk.

3. Mortgage Loan Financing Is Hard to Obtain

Ignoring old obligations that are in collections also makes it difficult for you to apply for a mortgage loan. Again, you have to look at the situation from the mortgagee’s point of view. Would you, if you were in the same position, be motivated to grant a loan to someone who has pending obligations?

To get back on track financially, you need to learn to control your spending. After you are able to control your spending, you also need to place a priority on paying debts. Otherwise, your credit rating will suffer and so will your ability to obtain positive financing, such as a mortgage.

4. Jobs Are More Difficult to Obtain

By throwing away bills from collectors, you can also affect your job-seeking ability. The link between getting a job and unpaid debt is called trust. Potential job seekers can hurt their credibility if they show they cannot act responsibly and pay their bills on time.

To convince an employer that you are learning to get out of your debts, you need to show that you have a good reason why you incurred such debts and that you wish to pay off the obligation as soon as possible. While paying off a debt does not remove it from your credit report, it makes it simpler to explain your financial situation to a potential employer.

5. You Could Get Sued

You also need to consider the possibility that you could get sued. Even if your debt is small, it does not mean it will not happen. If the statute of limitations for the debt is in effect, a creditor can still legally sue you. If you lose the lawsuit, your wages will usually be garnished. Even if you win the case, you will still lose, given the legal expenses you will assume.

If you still have unpaid debts, take note of the points we’ve discussed above. Consult a professional if you still need further help.

Investing may have always seemed like something for staid old men, but chances are, these stuffy old gents started out surprisingly young. If you have small, or even not-so-small-anymore, children, then it’s never too soon to teach them about investing. You just have to go about it in the right way.

Realistically, you need to wait until your child starts to show an interest in money. Once they realise that 50c buys them their favorite candy and so $1 buys them twice as much – that’s the time to strike. You can begin with the humble old piggy bank so they can watch their money accumulate, then maybe move onto a compartmentalised piggy bank that has slots for spending, saving, donating to charity and investing.

Teach the difference between saving and investing

You may have looked at the piggy bank idea and wondered why there were bellies for saving and investing. There is a difference – saving is putting money aside without risking it in any way. You may earn interest, but other than that, there’s no real opportunities for growth. Investing – in a company or a stock – means more risk, but there’s some big growth opportunities.

Kids can start off by saving and watching compound interest do its thing – they’ll love it – and once they have a decent amount, they can take some money out and invest it. It may be in a company they’re a fan of, or in some Star Wars figures, or some rare silver dollars from Golden Eagle Coins; whatever they choose, they need to see the value of their investment change over time and learn how to work those changes.

You’re raising an adult, not a child

One day your little girl or boy is going to be a woman or a man and so by teaching them about investing, you’re helping to make sure they’re comfortable. As hard as it is to consider, you won’t be here forever, so helping them to become financially savvy and independent is a good move for everyone. OK, your 18-year-old hasn’t made her first million yet, but she’s got a decent wedge and she knows how to keep it growing. It’s about forming habits as much as anything.

Let them play

There are lots of dummy trading and investment platforms out there and older children can have some fun creating their virtual portfolio and tracking their investments. They’ll fall over a few times, but that’s an important part of the learning experience. If you can find a mobile app that your children like, then this will help them to see it as a game – until they decide to get serious, of course.

Buy them a variety pack

Ask your kids to pick out their top five or ten favorite companies or brands – you can already imagine what some of the names on the list will be… Buy some shares in them and let your kids watch the fortunes as they go. This is another valuable lesson, because if their all-time favorite sneaker-maker loses money, then they’ll learn not to be swayed by emotion and loyalty.

Lastly, remember to give back

That one belly in the piggy bank – donating – is possibly the most important of all. There’s little point in earning and making money if you just horde it all. Giving money to charity is a highly rewarding thing to do, even if it’s just a few dollars a year, so set this habit down early, because we all benefit in the long run.

As you may  recall, back in 2012, our family moved into our forever home thanks to some amazing help from my  parents. At the time, we were just renting the property from my parents until we were in a good place, financially, that allowed us to purchase the home from them, which we did in 2015. Here we are now, homeowners, and we couldn’t happier.

How did we get here?

The first step we took on the journey to credit repair was to pull copies of each of our credit reports. From there, we made sure that any good debt we had was being reported to show that we were making out payments on time.

Next, we paid of any small debts on our credit reports first. Once we got to the bigger amounts, we called our debtors and they worked with us on a settlement amount for us to pay to clear the debt from our report.

From there, we went to our bank and took out a secured credit card to use for emergencies and made sure to pay the bill on time every month.

Ways to help you rebuild your credit.

If you are looking to rebuild your credit, you need to understand that as you do it, you will be paying higher interest rates for things but in the end, it will be worth it.

1.  Get yourself a secured credit card. Make sure you use it occasionally and also pay the bill on time.
2.  If you need a car, look into auto credit program. There are quite a few out there that will allow you to purchase a reliable car with financing at a higher interest rate but they will report you payment history to the credit bureaus to help raise your scores.
3. Pay all of your current bills on time, every last one of them.
4. If you don’t already have a checking and savings account, get them.
5. Get a copy of your credit report and start to pay off your debts. Make phone calls and ask for settlement offers or payment plans.
6. Monitor your credit continuously.

After taking these steps, you can watch your credit score start to climb!