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 identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair
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% -
3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.
Debt Elimination Mistakes
Debt elimination can be a very tricky process. Before you start addressing it, you’ll want to know what it is. Debt elimination, simply put, means eliminating your debts. You devise a plan to address and eliminate our debt. This presents some very unique challenges when attempting it on your own.
Don’t get discouraged; however, you can do it yourself.
Video: Suze Orman - Why Do We Need Credit Cards?
7 Common Mistakes
There are many mistakes made when attempting to eliminate debt. Below are seven of the most common. Don’t make these mistakes.
Not devising a budget and sticking to it.
Canceling credit cards before they are paid off. Never do this if you can help it.
Obtaining new debt.
Paying only the minimum amount due each month.
Getting a debt consolidation loan.
Falling prey to a debt elimination scam.
The final one – putting off dealing with your debt.
Don’t fall prey to credit repair scams, which are fairly common today. The Federal Trade Commission (FTC) provides some good indicators to look for when dealing with credit repair companies.
The company requires you to pay for their services up front before they even do any work for you. By law, they cannot require payment until after they have completed their services.
The company mentions nothing about your rights, nor what steps you can take yourself that cost you nothing.
The company discourages you from contacting the three major credit reporting agencies yourself.
The company states that they can eliminate most, if not all, negative information on your credit report, even though that information is accurate.
The company directs you to apply for an employer identification number (EIN). The purpose, they say, is to create a brand new credit identity and a fresh, new credit report. They tell you to use this for identification, instead of your social security number.
The company tells you to dispute all information on your credit report, even accurate information.
Debt Elimination Strategy
Before you do anything in attempts to eliminate your debt, you have to establish a household budget. Without a concrete budget, you will fail before you get started on your quest to eliminate debt.
Your debt elimination strategy has to begin with a budget in order to get your financial picture in focus. Once you know what’s coming in and what has to go out, you’ll know what’s left over. You can use the leftover to eliminate and pay off your debt.
There are many resources available online and in the form of books to assist you in creating and maintaining a household budget. Below are several that give direction and clarification of the steps necessary to establish a solid budget.