One of the things that lenders will look at is the amount of debt you have relative to the total amount of credit you have. If you debt is close to your total credit, you are consider high risk as the chances of you not being able to meet your debt obligation are high.
For example, if you have a $5000 limit on your credit card and you regularly carry a balance of $4700, you will consider riskier to lenders than someone who has the same credit card but carries a smaller balance of $700.
In general, you should aim to use no more than 60% of your available credit. If your credit card has a limit of $5000, you should try to pay it down to about $3000. You should also avoid adding more debt to the current balance as much as possible.
It is even better if you can pay off your credit card in full each month. However, this can be difficult if the amount of debt is too large. No matter how big the debt is, you can eliminate it as long as you continue to pay down the balance consistently.
If your debts are spread over a few credit cards, you can start with the smallest debt first. The rationale is simple. Eliminate the smallest debt can provide the motivation you need to continue with the debt elimination process.
Once the smallest debt is eliminated, you can put that credit card away and move on to the next smallest credit card debt. With this process, you may be able to eliminate the debts for two or three credit cards. You will start to see the result of your debt elimination process faster.
If you prefer to start eliminate the largest debt first, that is fine too. You will need strong discipline to see yourself through the debt elimination process, as it takes much longer to see positive result.
While working to pay down you debt, you should also start cutting down your expenditure. You can cook more often at home instead of eating at the restaurant, buy less clothes, rent DVDs instead of going to the movies and so forth.
At the same time, you should think of ways to increase your income. This includes taking up a part time job, do freelance works or set up garage sales.
Another thing is to improve your financial education. There are many personal finance management books in the library that you can borrow. If you have some spare cash, you can buy a couple of them from Amazon online store or you local bookstores.
Paying down your debts to a minimum will definitely help elevate your credit score. However, good financial habits such as saving and investing will go a long way to help you avoid debts and keep you credit score high.
So the question here is how you can eliminate the debt of your credit cards. In fact, the best way is not to use any credit card. You should cut most of your credit cards. You can keep one or two cards which are of lower interest rates so that you can use it in case of emergence.
Remember, you are keeping the card for emergence. You should not use it if it is not an emergent case. You have to be very clear that thing such as buying a new hi-fi system is not an emergency.
You can also consider re-structure your debt. This is extremely useful if you have to pay back for more than one credit card. You may move the debt of your cards to loans with lower interest rate. In this case you will be able to settle the debt in a shorter period since you can pay less interest.
Besides, you can also try the following strategy. You can firstly settle the debt of the card with the highest interest rate first. This is because it will help you to save the amount of interest you are going to pay in the future. The exact amount you can save will be a very difficult mathematics question. However, the good news is that you can easily find calculators on the amount of debt you can save from the internet.
You may also consider consolidating your debt. You can do it easily if you have a flat of house. You can use the home equity loan to pay off the debt of the credit cards first. So what is the point or advantage of this? The most essential advantage of this is that the interest will be a lot lower. Again, you will be able to settle the debt faster since the interest you have to pay is a lot lower.
No matter how you try to cut down the debt of your credit cards, the most important thing is that you do not add new debt. As a result, even if you do not cut the cards, you should not use the card to pay. You should only purchase if you have the cash on your hand.
Both Stephen Chua & Jerry Leung are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Stephen Chua has sinced written about articles on various topics from Free Credit Report Score, Credit Cards and Mortgage. If you want to know more , check out this credit improvement resource at NetCreditGuides.com. For more useful credit tips, drop by. Stephen Chua's top article generates over 60500 views. to your Favourites.
Jerry Leung has sinced written about articles on various topics from Lose Weight, Marriage and Writing. The author has great interest in finance. You can check his website on . Be sure to check. Jerry Leung's top article generates over 90500 views. to your Favourites.