Credit Card Debt Management

One of the most important numbers in your life is your credit score. Simply put, this is how lenders decide whether or not to lend you money and at what interest rate. The higher your credit score the better off you will be.

Unfortunately, some people have a low credit score because they have been doing all the wrong things. Here are three of the quickest ways to kill your credit score:

1. Paying late. If you do not pay your bills on time your credit score is going to fall sooner rather than later. Your payment history makes up 35 percent of your credit score. Even if you do everything else right, paying late will still drag down your score.

2. An account in collection. When a lender gets tired of trying to collect money from you they may sell your account to a collection agency. This may not sound like a big deal, but it will result in a “collection status” mark on your credit report.

3. Ignoring your bills. If you think that paying late is a big deal, not paying at all is even more harmful. The more payments you miss the worse your credit score is going to get. Additionally, waiting too long to send money can result in a charge off; this is one of the worst things for your credit score and report.

These are three ways to kill your credit score. They are not the only things you should avoid if you want to keep a high score and a clear credit report. You must also avoid maxing out credit cards, going into foreclosure on your home, filing for bankruptcy, etc. Luckily, if you are smart with your money and use good common sense you should be able to build your credit score to an above average level in no time at all. 

Do you have a good credit score? Have you worked long and hard to accomplish this goal? If so, good for you. Having a good credit score can financially help you in many ways. But of course, keeping this score is not guaranteed. If you begin to make mistakes you will find your credit score dropping and your anxiety increasing. Is this a situation you want to face?

Here are two easy ways to keep your credit score in good standing:

1. Continue to pay every bill on time. You don’t have a high credit score because you missed payments and let debt mount up. If you want to keep your credit score safe you need to continue to pay all of your bills on time no matter what it takes.

2. Monitor your credit report. Believe it or not, your credit score can take a huge hit if a mistake is made on your credit report. When was the last time you checked your credit report for a mistake? If it has been more than a year you should request a free copy for your review. Is there an error on your report? If so, you need to contact each credit bureau to file a dispute.

It is a big accomplishment to have a good credit score. It is even better to have a high score and keep it like this year in and year out. If you want to keep your credit score safe make sure you continue to pay all your bills on time, and review your report from time to time. You earned your high score, now it is time to make sure it stays this way forever.

If your credit card accounts are among those being affected by credit limit cutbacks, it may be affecting your FICO score by narrowing your debt-to-credit limit ratio. Creditors typically like to see this ratio at 30% or less, but if your $20,000 credit limit just got halved on a card with a $5,000 balance, your ratio just went from 25% to 50%. It can pose a problem, depending on how high your credit card balance is, but there are some steps you can take that may rectify the issue.

Call and ask. Your credit card issuer may be willing to reinstate your previous credit limit. Chances are good your credit limit reduction was the result of some arbitrary computerized decision, and a real human being may be more sympathetic if you explain your situation. If necessary, ask to speak to a supervisor who may have more bargaining power. The biggest mistake you can make is to simply take your lumps and never ask for mercy, if you really need it.

Transfer your balance. You can open a new credit card, although this will not necessarily be the best thing for your FICO score, which takes into consideration the age of all your credit accounts. You might also shift the balance from one of your existing credit card accounts onto another of your existing credit card accounts where the credit limit is higher. For instance, your card had a $4,000 limit that got sliced to only $2,000. As a result, your $1,000 balance suddenly looks much higher in relation to the limit. If you had another credit card with, say, a $5,000 limit and zero balance, the $1,000 balance would fit much better there. It will probably result in a balance transfer fee and the interest might be higher on the second card, although you might be able to call the $5,000-limit card issuer and negotiate that interest rate. Just tell them you’re considering closing the account, but the interest rate is awfully high for your liking. You may be surprised what could result. Keep in mind that negative consequences are possible from too much balance shifting. You could see an interest rate hike or even a credit limit reduction on your other credit cards.