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Households are increasingly relying on credit cards to offset the high cost of living. In the final months of 2022, credit card balances rose $61 billion, the biggest quarterly gain since the Federal Reserve began collecting data in 1999.
Want to control your debt?
Don't hide your head in the sand, just make the minimum payment and think that's enough, says Sarah Ratner of Nerdwallet.
Find a strategy that works for you.
Here are three popular debt repayment strategies:
Are you motivated to check things off your to-do list? Try the snowball method . Make minimum payments on all bills to stay on top of things. Invest every extra dollar in your smallest remaining debt. Once it is removed, move on to the next smaller debt.
Do you want to save money with interest over time? The landslide method prioritizes paying off the debt with the highest interest. This method can save you the most money, but it can take a long time before you feel like you've reached your goal.
Want to take advantage of a good credit history? Consider debt consolidation if you combine all your debts into one loan. Consolidation loans often have lower interest rates than credit cards if you have good credit. When used correctly, this method can help you pay off your debt faster. But stay away if your credit score is too low to give you a competitive interest rate.
You may have seen the FTC consumer advisory about credit repair companies engaging in illegal business practices.
While there are reputable companies out there, you can spend an hour or two doing it yourself, it's free.
According to Ratner, it works like this:
- Download your Equifax, Experian and TransUnion credit reports from Annualcreditreport.com for free until the end of 2023.
- Check every credit report for issues like B. Your account doesn't remember opening and contains incorrect information. Make sure all public records, such as evictions or sentencing, are accurate.
- If you find incorrect information, dispute it by contacting all three credit reference agencies. Send an email explaining the errors. Attach supporting documentation. Credit bureaus usually have 30 calendar days to investigate your dispute.
No credit recovery company can remove negative information, such as bankruptcy or debt, from your credit report , if true . However, according to the Consumer Financial Protection Bureau, the most negative information may only appear in reports for seven years (10 years of bankruptcy). Contact the credit bureaus to remove outdated information; You can increase your credit score overnight.
So, when is the right time to hire a credit repair company? This can be useful if potential clients contact major credit bureaus.
Beware of red flags. Don't hire a company that asks you to discuss accurate information, promises to remove valuable negative information, or requires you to pay up front.