As summer approaches, temperatures are rising and so are credit card balances. To make it worse, we are in an inflationary environment AKA the worst time to have credit card debt.
Credit cards are a very touchy subject because we all need them to build credit, but they don’t come with instruction manuals. Most of us don’t figure out what we should be paying attention to until it’s too late, and we are in repair mode.
The first step in improving your credit score and getting rid of credit card debt is creating a plan. If you continue to delay creating a plan, it will get worse. Whether that is cutting back on expenses, creating a pay down strategy, or eliminating high interest debt first. There are many factors to consider while you formulate your approach.
Let’s review some quick tips to keep in mind when creating a debt management plan to keep your credit score healthy:
- Review your credit report. Take advantage of the 7-day free trial offered by experian.com to find all the places where you have open credit lines. The reports can also help you understand the components that go into calculating your individual credit score – knowledge is power!
- Minimize the number of credit cards. Your ideal number is 2-3 cards. Do not immediately close unused cards, especially your oldest ones as length of credit history contributes to 15% of your credit score – pay off your outstanding balances and put them in your drawer. Out of sight. Out of mind.
- Set up automatic payments. If you cannot pay it off – revisit your spending habits. Do not miss payment due dates.
- Keep your credit usage low. Do not max out any of your credit cards and spread purchases across them to minimize usage of a single card.
If you do absolutely nothing else…STOP applying for new credit cards.
In the words of Uncle Ben, “remember, with great power comes great responsibility”. Use credit as a gift that you can leverage, and don’t let it become a curse to your wallet.
Interested in creating a plan to help manage your credit card debt? We would love to meet you. Please schedule a consultation with our financial planning team to get started on your journey of consumer debt freedom.
All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.