1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will term you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair Isaac).

2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% - 30%!

3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have atleast 2 credit cards and 14% of them have 10 or more credit cards.

(View Archives)

Tips for a Successful Debt Consolidation

If you have a huge credit card debt bill on which you are paying high interest rates, you should consider using the equity built up in your home to finance a debt consolidation loan. This type of a loan is called a home equity loan. A home equity loan has the following characteristics:

A home equity loan draws on the equity built in your home as collateral. This means incase you fail to make your monthly payments, the bank can possess your home (collateral).
A home equity loan (if used correctly) could lower your debt without affecting your credit rating.
A home equity loan is also known as a secured home equity loan.

Consider the following tips if you want to take out a home equity loan:

1) Be aware that your home could be foreclosed if you cannot afford to keep up with the monthly payments towards the home equity loan. If you have even one small doubt towards keeping up with the monthly payments, then do NOT take out the home equity loan. Do not rely on that employer advance or job promotion to help you pay off your home equity loan. There is no guarantee that you will get the job promotion!

2) If you take out a debt consolidation loan, you do NOT qualify for bankruptcy protection in extreme financial emergencies such as loss of spouse, loss of job, disability, etc. This is because by taking out a debt consolidation loan, you are turning all of your unsecured debt towards secured debt (your home is the secured collateral). However, if you had kept all your debt on your credit card and NOT taken out a debt consolidation loan, then you would still qualify for bankruptcy protection if you need it.

3) Most consumers who take out debt consolidation loans go on a shopping spree right after. This is because they feel they have more disposable income freed up every month and have more money to spend towards unnecessary lavish luxuries. This ends up in the consumer being able to only make the minimum monthly payments and carry a high debt balance. The root of the debt which is the consumer's spending habits have NOT changed. Its only that money has been freed up for a short period of time, only to accumulate more debt.

4) If you have problems budgeting your monthly expenses or overspending your money, you should consider a debt settlement consolidation program, which forces you to change your spending habits and NOT just put all of your shopping into your credit cards.