CREDIT CARD DEBT

It is impossible to imagine life without credit cards. They are convenient and useful. However, credit card debt can become a nightmare. You can, however, keep the debt from lowering your credit score and in turn lower your creditworthiness through 5 simple steps.

1. Do not accrue a huge balance on your card. While purchasing something, swipe the card when you know that you can pay more than the minimum payment and pay down the balance. Therefore don’t spend more than you pay. A balance on the card that is not paid soon is unattractive to other lenders.

2. Debt has a direct effect on your credit score. Therefore do not utilize more than 25% of your credit limt at a time. A high debt-to credit ratio looks like an indication of inability to pay debts and makes creditors wary of giving you credit.

3. It is not always advisable to wait until the debt mounts up and try to negotiate a settlement with your creditor. Though you end up paying a fraction of what you originally owe, you may end up paying tax on the money you saved. Additionally, a creditor will offer you a settlement only after you have been past due for many many months and this will not look good on your credit report. Also, if you’ve been granted a settlement or a special payment plan, it is highly unlikely that you will be eligible more than once with any creditor.

4. If you’re taken to court over non payment of debts or unsecured payments, it looks very bad on your credit report. This may result in creditors garnishing your wages or seizing your property.

5. Credit card purchases can be beneficial too. For example, you can use credit cards as a short-term loan to help cover the costs of moving, or to buy items that you truly need, but don’t have the cash to cover. Set up your own repayment plan, and stick to it. Repaying the balance over three months won’t cost you too much in interest, but drawing out the repayment over three years would be very costly!