Being overwhelmed by credit card debt can be a challenge. Constant late fees can quickly add up resulting in over the limit fees. For those tired of the never ending credit card battle, understanding how to pay off credit card debt and implementing a strategy will not only help improve your credit rating but also stop harrassment from creditors. Consider these options before choosing credit card settlement or other bankruptcy alternatives.
First Step – Your Credit Report
Any time a person applies for a loan or credit card, their credit history is checked. A potential lender or creditor will review the number of open accounts, balances and payment history on record. This information is used to determine if the applicant is a good candidate to receive the loan or line of credit. It is not just lenders who check credit; banks, insurance companies, property managers and even some employers review credit history.
Because credit plays such an important role in everyday life, it is important to maintain a good history as it can impact where you live and work or even health, auto and life insurance rates. If you have not checked your credit history lately, this should be the starting point when considering how to pay off credit card debt. Any negative or inaccurate information should be disputed in writing. This may take some time, but it will result in an improved credit score and is therefore well worth the effort.
Ignoring letters from creditors will not make the problem go away. You can work to resolve the issue on your own or seek assistance through debt counseling, debt settlement or by consolidating credit cards.
Do It Yourself Debt Settlement
Assuming that the credit reports are accurate, the next thing to do is work at negotiating payoff terms with creditors. For credit cards that are already past due contact the company and negotiate terms that you can stick to. Since credit card companies want to get as much of the balance owed before sending it to a collection agency most are willing to work with consumers.
There are two important things to remember here. One, be sure you stick to your arrangement. Two, get the agreement in writing before making any payments. Credit card companies can get amnesia very quickly, especially when they have the payment in hand, so cover yourself.
Good Credit Debt Solutions
If your credit is still in good standing, a debt consolidation loan may be a good option. Taking out a loan to pay off all outstanding debt will leave you with one monthly payment and all credit card balances at zero. Remember, a zero balance is not always the best thing when applying for additional credit because it does not show a payment history. This can also be considered a risk since you have the ability to use the line of credit at anytime.
Many credit cards companies will extend offers such as transferring your high interest rate balances to their lower interest rate credit cards. Be sure to read the fine print since one missed payment could result in the interest rate escalating to the previous rate you were paying. These apparently great offers are only great if you don’t slip up!
Debt settlement is another option to look into when researching how to get rid of credit card debt. One of the best advantages, from the consumer perspective, is that the collection calls will cease and you will not be subjected to legal action, which can be hugely stressful and extremely expensive. In addition, many creditors will agree to bring old accounts current and reduce or delete late payments or over the limit fees. On average debt settlement companies can negotiate payoffs in 24 to 48 months and at a reduced cost then the original debt total.
Keep in mind that debt settlement companies charge upfront and monthly fees to participate in the program. Another downside is if the debt company does not negotiate a “paid in full” status, paid debts may be reported as “settled” on your credit report. This can raise a red flag for potential lenders further down the road.
Knowing how to get rid of credit card debt is the easy part. It is taking the first step and making the commitment to see it through until you are debt free that is difficult. Carefully examining your options and finding what works best for you will result in being credit card debt free. If you feel that your situation is out of your control, contact one of the free debt counselling services who will be able to offer you independent advice. Sharing the problem can make a huge difference to how you go on to deal with it.