Feeling swallowed up by credit card debt? It might be time to reassess your situation. Chances are you’ve made some blunders that can be rectified. Knowing where you’ve made mistakes affords you the opportunity to change your ways and prevent you from tumbling deeper into debt.
1. Not checking your credit reports annually
First off, it’s free, so there’s no excuse not to check! You would be surprised at the mistakes a credit report can have. Clearing your record of any errors can make a huge difference in terms of getting hired, qualifying for a lower interest rate, or learning about a stolen identity. Lenders use your credit report to ascertain whether you’re a potential risk or a star candidate for all sorts of financing — car loans, home loans, cell phones and cable. If there’s something on your report that looks wrong, dispute it. The Fair Credit Reporting Act gives you the right to correct or delete any inaccurate or outdated information. Annualcreditreport.com allows you to access your reports from Equifax, Experian, and TransUnion. If you see errors, send a letter to the credit reporting agency, or communicate with them online. You could end up saving hundreds or even thousands of dollars in interest.
2. Only Making the Minimum Payment
Paying the minimum is certainly better than nothing, but in the grand scheme of things it’s not really going to help you pay off your balances. You also get stuck in the vicious cycle of continually paying off just the interest. If you can afford to pay more than the minimum, by all means go for it! It will help you get that looming number down. However, if paying more than the minimum is going to bust your budget, you’ll need to figure out a debt management program. Calculate the minimum on each card and make sure you pay that every month. Each time you pay, the minimum payment goes down slightly, so if you continue to pay that initial minimum payment, your principal will go down (unless the credit card company increases your interest rate). So make sure to keep checking that fine print!
3. Making late payments
Just because you’re already swimming in debt, doesn’t mean it’s OK for you to keep adding to it. It might seem like a drop in the bucket, but over time it adds up. In addition, you’re wasting money that you could have put towards the balance. A payment that is even a day late can increase your interest rate and put your account into default, not to mention penalty fees added to your balance. To make sure you don’t slip up, sign up for online bill pay which debits your bank account and not your credit card.