You may go for credit card consolidation when you’re facing problems to manage your multiple bills and paying them off. To consolidate your credit card bills/debts, you can enroll in a consolidation program or take out a loan for the purpose. You can also opt for balance transfer method wherein you transfer your high interest debts into a low interest card. However, whatever option you choose, you should try to avoid the mistakes often committed by people while getting credit card consolidation help. Go through this article to know about 5 common mistakes and how you can avoid them.
Not consolidating all your high interest debts – When consolidating your credit card bills/debts, make sure you consolidate all your high interest bills. If you cannot take out an amount with which you can replace all your credit accounts, then make sure you consolidate all your high interest debts into one loan for which you need to make single monthly payments.
Closing all your credit cards at once – Closing all your credit cards may reduce your credit score to some extent. This is because one of the main components of your credit score is credit utilization ratio. So, when you close your credit accounts, the available credit limit drops thus increasing your credit utilization ratio and in turn, your score may get reduced by several points. So, when going for credit card consolidation, do not make the mistake of closing your credit accounts, once you repay them. Keep them open but don’t use them till you’re out of debt completely.
Not choosing the right consolidation company – Often people make a mistake by enrolling with a non-reliable consolidation company. To get professional help from a reliable debt/credit card consolidation company, always check BBB (Better Business Bureau) records to find out whether or not the customers are satisfied with the services provided by the company. Moreover, it is better if you get help from a company which has got high ratings from BBB.
Taking out new credit before repaying the existing ones – You will make a mistake if you take out new credit without paying off the existing ones. You should know that a consolidation program doesn’t cover any new debt. So, if you’ve enrolled in a consolidation program, do not take out new credit before you repay the existing ones. It holds true for consolidation loan and balance transfer method as well. Do not take out new loans before you pay off the existing ones.
Not checking how long the low interest rate is valid – If you opt for balance transfer method for credit card consolidation, you should always enquire how long the introductory zero or low interest rate period if valid for. This is for you to know that the interest rate usually gets much higher when the low introductory period ends. So, you’d have to make payments on much higher interest rate if you’re not able to pay back the loan within the low introductory rate period.
While getting help of credit card consolidation, you should address the real problem. Just getting help of consolidation will not help you solve your problems if you don’t learn to manage your money properly. You need to plan a suitable budget and follow it along with changing your lifestyle if required. Moreover, do not take out a number of cards as otherwise, it will become difficult for you to manage them properly.
Contributed by Kenneth Parkar
Debt Community Member
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