How Debt can hurt your Ability to get better Credit Cards
For millions of Americans, it hits like a sudden storm in the night. You are happily going on with your life and you wake up one morning and you open up your credit card statement and wham, you are in serious credit card debt. You grab your statements, your husband and your calculator and you start going over every purchase. Surely, you couldn’t have spent that much. But credit card debt is very sneaky, especially when it is spread out over several cards. Before you realize it, you can have 15 grand on one card, another 20 grand on another and you are suddenly up to your eyeballs in debt. So, you are a mature, responsible adult, what can you do about it?
Luckily, there are easy plans you can get on to figure out how much you need to pay each card every month to get out of debt by a set date. Some people give themselves 5 years, others 10. But an obstacle that most people don’t factor into their time frame is how their debt is going to prevent them from taking advantage of low-interest balance transfer options, or even getting new lower rate cards altogether. This can significantly delay the amount of time it takes to pay off your debt since you will be trapped paying a higher interest rate then you have to.
There are two major obstacles standing in your way. The first is called your debt to income ratio. Even if you make “good” money, the fact that you are saddled with so much debt means that your debt to income ratio ranks as “risky” on the scales of credit card companies that were thinking of giving you a card. It is almost a Catch-22 sort of situation where you need lower interest cards to help you get rid of your debt faster but you can’t get them because your debt is so high.
The other major factor that you have working against you is that every time you apply, and are rejected, for a credit card, it makes a black mark on your credit report. Again, it is a situation where the harder you try to get rid of your debt, the more difficult it can become.
The best thing you can do is to suck it up and simply make the highest payments you can on the cards that you have. As much as it stinks, you did dig this hole yourself, and you have to dig your way out of it. You won’t have to go it alone for too long, however. Once other credit card companies see that you are making a good faith effort to get out of debt and improve your overall credit score, they will come flocking to you with better offers with lower rates. The key is to not make the same mistake twice.
If you want to speed up the process at all, a good trick is to take any sudden influx of money that you get and put it all directly toward your balances. If you are in line for a big time tax refund or if you are lucky enough to get a raise, simply take that revenue stream and put it directly towards your debt.