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How to eliminate credit card debt

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Don’t eliminate credit card debt all at once

Many of us look to eliminate credit card debt completely in order to feel truly financially secure. However, this might not be the best approach. It is best to avoid completely eliminating your debts as long as you maintain control. A little bit of debt is a very good thing.
Keeping some debts open and active can actually help your credit, but this may not seem to make a lot of sense. It is very important to make consistent payments on your bills. Your individual credit score hinges on this ability. You may fail to adequately show a consistent payment history if you completely eliminate credit card debt.

After they eliminate credit card debt many people also like to close their accounts. Either, this isn’t the best approach, either. Your individual report will look better to future creditors if you have more active accounts. You still want to keep the cards active for show when you eliminate credit card debt. A potential creditor is looking to see your past history as well as your current capacity to pay. Without eliminating your report looks better.

A bunch of closed accounts is the last thing that a creditor wants to see. This is especially true if the individual decided to close all of the accounts at once and to eliminate credit card debt all at once. It sends a red flag to the potential creditor when many accounts are abruptly closed. Instead he faces a brick wall of closed accounts he really wants to track your payment history. It really doesn’t do much for your payment history while it is great to have your accounts paid in full.

Several years ago, I used to work as a loan officer. When we had a potential client who barely passed the rigid requirements for a low interest loan, we would cringe. In many cases the person abruptly decided to eliminate credit card debt didn’t meet the requirements. Following that, the individual closed each of the accounts. Sadly there was none action on his report but we really needed to see current action. We either had to offer a loan with a higher interest rate or to turn down the application. It is really important to keep your accounts active and open in order to keep a strong credit report.

You shouldn’t eliminate credit card debt, this is not the advice to you. However, think about if it is better paying a small balance every month by to eliminate it in full rather than closing the accounts and paying everything off in one lump.