Paying off your credit cards
How many times have you heard…Credit is Bad? or …...Don’t spend money you don’t have? Growing up it was drilled into me that credit was dangerous and should be avoided like the plague. Little did I know then that was my parents’ belief, and those beliefs would affect my relationship with credit. Instead of teaching me how to use credit wisely and in a way that was a tool I was taught to be afraid or it. No wonder when I was old enough to make my own decisions about credit, I did ALL the wrong things and soon found myself in credit debt.
By the time I had kids of my own my credit was a shambles and so I avoided paying anything with credit and strictly used cash basically living paycheck to paycheck. Even when I began working in the Mortgage Lending industry and I realized my mistake; I thought it was too late. That was incorrect too. It is NEVER too late to fix your credit. This article will focus on some of the tips I learned in my own journey that help me pay off my credit card debt and therefore improve my scores.
FIRST - Never pay off your charge offs first. Face it if the creditor has charged your account off on your credit it has done the damage and paying it off is not going to change that.
SECOND - Work on your active accounts first by paying the minimum due on time EVERY MONTH! On time payments are the biggest impact on your score so the sooner you do this the better. You may not be able to take your late payments back, but you can start repairing the damage by paying on time going forward. If you can do automatic payments that you do not have to think about that is the best advice I can offer.
THIRD - Make a list of all your credit cards and list the statement end date. Once you have this list put them in chronological order, so you know what order to pay them each month.
FOURTH - Figure out how you want to pay the debt. Do you want to tackle the smallest item first or the item with the highest interest? Personally, I started with the smallest balance first so I could see the results fast. Once one item is paid to 0 use the money you would have for that debt to make a second payment on the the next item you want to pay. If you follow this plan, you will see the debt reduce quickly.
FIFTH - This is probably the most important tip*******DO NOT CLOSE YOUR ACCOUNT******* Once you have a 0 balance you may be tempted to close that account but that would be bad. When you close the account that will lower your active accounts and it will also factor into your utilization if closed. Instead remove temptation by freezing the card or locking up in a drawer.
SIXTH - If you do not use the card, you can lose the privilege so it might be smart to cycle through your cards every 2 or 3 months. Or assign each card to a particular bill or activity so you get regular use and pay the balance regularly. This will show the creditors that you know how to manage your money and your limits will be increased.
Finally make sure you are reviewing your credit cards every month for charges you don’t remember initiating. With so many online applications sometimes we authorize items we don’t remember. Another tool that I used to identify which credit cards were costing me the most was a credit card payment calculator like the one below. I hope these tips can help you with your credit card debt.