Don't Let Delinquent Debt Ruin Your Finances
It's so easy to get into debt. That's the way the world is run. Not many people have the money to pay cash for big purchases like cars or homes. When you need a repair on either of those items, it's all too easy to whip out the credit card and charge it. While it's easy to get into debt, it's not so easy to get out of.
It's also not so easy to make sure you don't have any delinquencies that can ruin your finances. When you have delinquent bills, debt collectors come calling. The debt is marked on your credit report as being late, how many times it's been late and the amount you're late on. After the delinquency is reported, it impacts your credit score by lowering your points.
While there can be a lot of different delinquent debts, the biggest debt most Americans have is credit card debt. Because they're so easy to get, most people have more than one card with balances that they can't pay and so it goes into collections.
Credit Card Debt
People are of two minds about credit card debt. Some people think you shouldn't have any at all while others think it's perfectly okay to have multiple cards. The truth is that it's okay to have credit card debt as long as it's not delinquent. However, due to situations that are often beyond your control, this can happen.
If you experience a job layoff or you go through a divorce or other traumatic life experience, you might have the means to pay your debt. This doesn't mean that you're ruined and you shouldn't bother trying. This type of delinquent debt doesn't have to ruin your finances. But you can't be passive about it and think there's nothing you can do.
This is one of the biggest reasons that people get into trouble financially. They know there's a problem but they don't address it. The moment that you realize you're in trouble with debt, do something. You have to fight back against debt. If you're running into trouble and you have several cards, transfer the balance to the cards with the lowest interest rates.
If you have an annual fee or any kind of fee based card, you want to get rid of that card as soon as possible. There are too many other cards that won't charge you an annual fee for you to have to put up with that kind of charge. The reason that you want to do away with fee based cards is because if you have a card that charges you a $75 annual fee, that fee doesn't stop just because you become delinquent on your monthly payments.
So if you can, you want to switch any balances on that card to another card. That opens up that annual fee so that you can use that to pay toward the other cards. If you're not sure which card is the lowest, you can check with a credit card index that will show you the rates that various cards have.
Next, you want to contact any of the delinquent accounts you have. Credit card companies do have hardship problems where they will be more lenient with you than if you simply overspent and just got behind in paying the bill. While most of these companies won't simply wave away your debt, they are willing to reduce your interest rate and stop the late fees while you get your financial life back in order.
Sometimes what they'll do is cut your payment down or stop the payments for a brief period of time. Don't use a debt settlement company to help you get out of credit card debt. Using one of these companies can lower your credit score, plus, you're paying them to help you get out of this debt. Instead, do it yourself. You'll save money and it won't impact your credit any further.
There are some people who will tell you that if you have multiple credit cards to pay them off and then close that account. But closing a credit card account, whether it's delinquent or up to date with the payments, can actually hurt your credit more.
The reason it does this is because it shows up on your credit report as a closed account. If there's a balance, then it looks like you debt ratio compared to your open account ratio is higher than what it actually is. If your credit is good, look for cards that you can get that offer very low financing percentages and will offer you some perks if you transfer balances.
Learn more here in my section explaining all about loans and credit cards guide to help you get rid of debt and prevent further financial crisis.
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