If you’re currently struggling to pay your monthly credit card bills, you’re not alone. Estimates show that there are hundreds of thousands of people in the same position you currently find yourself in. Credit card debt affects people of all different kinds; it has no social or economic boundaries. It affects both rich and poor. Fortunately, there is a light at the end of the tunnel. There are several steps that you can take to help get out of debt.
Rule number one: DO NOT use your credit cards from this moment forward. Put them away; lock them up in your safety deposit box if necessary. If you can't put them away, I suggest that you destroy them. This could potentially save you hundreds if not thousands of dollars in interest. One caveat, don’t cancel your cards at this point.
Next, pay your monthly bills on time. Don’t let a day go by without making a payment when it’s due. You should never break this rule because it could have significant bearing on your credit score. If you are unable to make your payment or only able to make a partial payment, call the company immediately and inform them of your intentions. It is always better to keep the lines of communication open with the creditor. This will show honesty and accountability.
You should obtain a copy of your credit report. This can be done by visiting one of the three credit reporting agencies: Equifax, Experian and TransUnion. These companies also offer many tools which will help you understand what your credit score means and what factors affect your score the most. It is a very good idea to research these companies and try to understand what they do.
After analyzing your credit report, I recommend that you identify your spending patterns including what you currently owe on all of your credit cards and what interest you are paying for each card. It will help you establish a budget that you can work with and identify the cards that you need to pay off first (the high interest ones). Stick with your budget and try not to go over your pre-set sending limit. If you can, eliminate or cut some of your expenses and use the extra cash to help pay off the principal on the high interest cards.
If you have investments, consider using these to pay down your debt. Compare the interest you are making on your investment with the interest you currently pay on your credit cards. If it makes sense to you, this is a great way to slice off principal from your debts. Always remember to pay off the card that has the highest interest rate first.
Be careful of the so called “credit repair” companies that offer to help remove debt or eliminate adverse information from your credit report. Most of these offers are scams and are merely preying on your current situation.
If you still feel overwhelmed, the Consumer Credit Counseling Service, a non-profit organization, offers free or low-cost financial counseling. You can find out more at http://www.cccsatl.org .
In summary:
- Stop using your credit cards
- Continue making payments on time
- Obtain your credit report
- List your spending patterns
- Identify your total debt and list your credit cards by interest paid
- Establish a budget and eliminate unnecessary expenses
- Use investments to pay off principal
- Beware of credit repair scams
If you follow this plan, you will soon be on your way to paying off your debt and seeing your credit score increase!
Good luck and I wish you all the best.
