Decreasing Bad Credit Card Debt Without Hurting Credit
By Gina PogolMortgage Credit Problems Columnist
Charylene Asks: Dear Gina, I have too much credit card debt and want to stop using my cards and pay the debt down. But the companies raised my rates and it will be harder than ever. Plus, I heard counseling services make you close your cards and that can give you a bad credit rating. What can I do? I have never missed a payment but I might have to--I'd rather pay my mortgage and not my cards if I have to skip something.
Gina Says: First, Closing Cards Can Give You a Bad Credit Rating
Congratulations on making your payments so far, even though it's been tough. First, you are correct--many counselling agencies make closing out your cards a condition of your debt management plan. And that can give you a bad credit rating because it drops the amount of available credit, making your usage percentage higher. This can look pretty bad and drop your score. In addition, some creditors report that you are in a debt management plan and some mortgage lenders treat that the same way they would a Chapter 13 bankruptcy when underwriting a mortgage.
DIY (Do It Yourself) Credit Help
However, no one says you can't try working with the companies yourself. Especially if you have a good track record with them. Here are 7 tips to Do It Yourself Credit Repair. Many companies have "hardship programs" and are willing to freeze your account without closing it. They also are in many cases willing to lower your interest rates and/or minimum payments for a limited time. This can help you make some headway and get those balances down, which can improve your credit scores.
Home Equity for Paying Off Credit Cards
If you have home equity available, get a home equity loan, pay off as much credit card debt as you can, especially while the accounts are frozen and you can't charge more no matter how great the temptation.
Finally, if your mortgage payment is a struggle, and once you have your non-mortgage expenses down as low as you can get them, go to www.makinghomeaffordable.com and see if you qualify for a mortgage modification or refinance.
Thanks for writing and good luck,
Gina
About the Author
Gina Pogol has over a decade of mortgage lending experience, in addition to practice as a paralegal for a bankruptcy attorney, and as a business credit consultant for Experian. She is also certified to underwrite Fannie Mae loans. She earned her BS in Financial Management from the University of Nevada.
All information provided “as is” for informational purposes only, and is not financial advice. MortgageCreditProblems.com, its affiliates, and any of the independent providers of information on this site shall have no liability for any informational errors or incompleteness, or for any actions taken in reliance on information contained herein.
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