Credit card debt isn’t something anyone really wants, acknowledge the home finance experts at TexasLending.com, but it happens. Here, the online mortgage company shares three secrets to getting out of debt and raising a waning credit score.
1. Understand credit utilization.
The experts at TexasLending.com explain that credit scores are not the only valuation lenders consider when deciding on whether to underwrite a mortgage. Credit utilization is the percentage of available credit a borrower is currently using. Most lenders offer the best rates to those currently taking advantage of less than 30% of their available credit, reports TexasLending.com.
2. Raise limits and pay down debt.
One of the quickest ways a consumer can improve their credit utilization percentage is by requesting a raise in a current credit line. The important thing to remember here, says TexasLending.com, is that higher limits should not automatically equate to more spending. The goal is to create a noticeable distance between what is owed and what is available. Paying down credit card balances is another way to shrink the gap. Start with higher balances, as they accrue the most interest. Once paid off, that money can be used towards smaller balances until credit card debt is a thing of the past.
3. Transfer balances to a new card.
While applying for new credit may seem a bit counterproductive, TexasLending.com notes that many cards offer a six-month 0% introductory APR on balance transfers. This may be just the cushion needed to pay off debt without accruing any additional charges. And, if the new card’s interest rate is lower, a consumer may be better off financially in the long run anyway. The caveat here, however, is that some balance transfer cards charge a fee of up to 3% of the shifted balance so careful calculation and due diligence is imperative when considering this option.
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