Is Shuffling Your Current Debt A Poor Concept?
Is Shuffling Your Current Debt A Poor Concept
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Are you caught in the trap of shuffling your debts to the lowest interest rate credit cards you can apply for-even finding cards as low as 0% for a period of six months or year? Although it's a great concept to make the most of low interest rates, you need to also make an effort to pay off the debt in a timely manner. There are lots of individuals who are hopping from card to card while they continue to rack up large amounts of debt. It's easy to fall into this trap due to the fact you are not paying interest on these cards.
If you really want to safeguard your credit score and have the ability to continue qualifying for low interest rate offers, you'll need to get out of this card hopping cycle. The process of applying for many cards and transferring your balances will ultimately lower your credit history. Each time you obtain a brand new card, your score will drop a few points, sometimes in the range of 10 to 20 points, but if you should acquired many cards too rapidly, your score will probably be negatively impacted and you will be sent fewer offers of low annual rate cards.
It's essential for you to have a game strategy for decreasing your debt, not just shuffling it around. You will find two great techniques to follow when attempting to reduce debt. In the event you truly want to maximize your score because you plan to purchase a house and have to obtain the very best interest rate on a mortgage loan, then the round robin method will be the most suitable one for you. In this technique, you'll strive to pay down all balances on your existing cards to the lowest feasible percentage of your credit limit. In other, you need to try to pay down your cards to no more than 10% of your current credit limit. By practicing this method, you could increase your credit score by 30 to 70 points.
However, if working to get rid of debt is more essential, then you'll want to try the incremental method, which involves paying down the highest rate card initially while simultaneously making only the minimum payments on your other cards. When you are done paying the first card off, you'll start using the extra money to pay down the next highest card. When you finish paying off your credit cards, you can start applying cash towards other installment loans or your mortgage loan.
Regardless of which method you decide to use, you must make a commitment to pay down your debts and stop charging anything new.
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