Eliminate Credit Card Debt, But Not the Credit Card
Credit card debt holds many people in captivity, working from paycheck to paycheck to fill the pockets of the credit card companies. It isn’t that these cards are bad, it is how we use them that is bad. It is okay to use your plastic to buy things. But you need to control your spending and avoid getting deep in debt.
If you got rid of all of your plastic and didn’t use them, you would be better off than being in debt. But, it is better just to have small balances on your accounts that you pay off each month. Why? Your credit rating is based on your ability to pay back. If you don’t build any debts you can’t make back payments.
After you eliminate credit card debt you may be inclined to close your account. This is not a good idea in many cases. Having an account where you once owed a lot and now owe nothing looks great on your credit report. You need to have a few plastic cards to show that others find you credit worthy and that you are responsible with their trust.
Creditors have nothing to judge your ability to responsibly pay back if your credit report doesn’t show you ever having been in debt. If all you have is closed accounts and cards you don’t use, the creditor has nothing to go on when judging your credit-worthiness. As long as you can be responsible with your credit cards, you can keep them after you eliminate credit card debt.
Further, you really don’t want anything particularly unusual in your credit report. The more normal it looks the better it is for you. If you suddenly closed a bunch of card accounts, this may look a bit suspicious or at least erratic. You should continue to spend on your cards, but pay them off every month.
It may seem strange that having debt increases your ability to get things like home loans and low interest personal loans, but that’s how it works. Of course if you get in debt and can’t pay if off, that’s just as bad. You need to be a responsible user.
What a loan officer wants to see is both a history of paying debt and current trends in paying off to show that the borrower is financially sound. Even if you still qualify for a loan, you may end up paying much higher interest rates because you are deemed a higher risk if you don’t have a recent credit history.
To learn exactly all about the right ways to get out of debt visit also eight proven ways to get out of debt where you will find this and some more helpful credit card advice.
Article Author :Peter_Lisdorf
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