If you are experiencing any of these signs, you may have too much debt:
- Making only the minimum payment on your credit cards
- Charging more each month than you pay
- Using credit for items you previously purchased with cash
- Being close to your credit limits and applying for new cards
- Needing a consolidation loan to pay existing debt
- Not knowing the amounts you owe
- Draining your savings to pay debts
Take a look at your loans, their monthly/periodic payments and their rates. Next, consider which of these options for reducing and paying off debt is best for you:
- Start with the lowest balance. The satisfaction of paying off a debt can provide the motivation you need to tackle the next pay-off.
- Start with the highest interest rate. This method helps you lower the amount you pay in interest and gives you more money to save or put toward another debt.
- Start with the debt that gives you the most stress. Paying off this type of debt can improve your financial picture and help reduce your stress.
- Consider debt consolidation. Sometimes, consolidating outstanding debts into one loan can reduce not only your monthly/periodic payment, but also the total interest amount you pay.
Explore resources for a free financial review to help you get on track.
Understand the six things that can damage your credit score and history the most.
- Charge-offs. Six months or more of missed payments can result in your account being deemed " noncollectable ." The creditor writes off the account and reports it as "charged-off." Charge-off information stays on your credit report for seven years from the date of the charge-off.
- Debt collections. Many creditors hire third-party collectors who attempt to collect payments on charged-off accounts. Collection accounts may show up on your credit report and/or the original creditor may place a note on your report indicating the account is in collection status. This information stays on your credit report for seven years from the date of the last delinquency .
- Bankruptcy. All accounts included in the bankruptcy will be identified on your credit report. A Chapter 13, where a plan is developed to repay all or part of your debts, stays on your report for seven years. A Chapter 7, the discharge of all your debts, stays for 10 years.
- Foreclosure. Defaulting on your mortgage causes severe damage to your credit score and stays on your report for seven years.
- Tax liens resulting from unpaid property taxes. Unpaid tax liens remain on your report normally for 10 years at the discretion of the credit reporting agency; paid tax liens remain for seven years
- Lawsuits or judgments. Creditors may take you to court and sue for the debt if other collection attempts fail. If the lawsuit is credible and a judgment is entered against you, it will remain on your credit report for seven years from the date of the filing, even if you pay the judgment.