After you find out what your debt-to-credit ratio is, what can you do about it?
We show you several options that you can use, including a couple insider tricks.
Click on the “open” tabs to learn more.
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Snowballing Your Debts
After you hit one debt with all your “debt-killing” funds, move all your resources to the next debt, then the next, and so on…
Just a little extra a month can add up to a lot.
The name says it all: Snowball. Once you get the ball rolling, it becomes bigger and bigger as it smashes everything in its way. And being able to see your debts get obliterated is very inspirational.
Play with YOUR numbers
The most exciting thing is when you put your debt amounts in a spreadsheet, and are able to see how – when adding $50, or $100 a month to your highest-interest account – the debt gets killed in a much quicker time. Then, when that debt is finished, you take the extra amount PLUS the minimum payment from the paid off account, and add BOTH to the next account.
Now you have even more fire power to kill the next debt. And when that account is paid off… you can start to see the snowball effect.
So, use a couple tools from our arsenal and see how cool it can feel to see EVERY LAST ONE of your debts paid off in a few years. (Yes, even your mortgage)
Increasing Your Available Credit
It’s a simple math equation: The more credit you have available to you increases your debt-to-credit ratio.
Your official “quick fix” solution
Here’s an oldie but a goodie: In many situations, if your credit isn’t completely trashed and you have a good relationship with your creditor, you can request an increase in your credit limit on your account. This immediately lowers your debt-to-credit ratio by increasing the gap between what you have available to you and what you owe.
HOLD ON! This is for dedicated people only!
Here’s where you get to be real honest with yourself – because increasing your credit limit can be absolutely DEVESTATING to someone who has not learned to curb their spending habits. If your credit card is maxed out at $3,000, and your bank increases your limit to $10,000, your score could be positively reflect the new credit-to-debt ratio (30%) in about a month.
But if you have a hard time letting that card stay in your wallet, you have better think about this decision very hard, because maxing out a $10,000 credit card, and then trying to worry about paying it down, is a completely different monster.
Steps to get your credit limit increased
1 – Understand Your Agreement. Take some time to read the terms and conditions on your card (and maybe even some research on the company’s web site), but knowing what the creditor expects of you can only benefit your situation.
2 – Be responsible. Make sure your payment history reflects that you will pay back your debt on time as promised (see step 1). Try not to max out your account for long periods of time.
3 – Be predictable. Your creditor prefers to see a pattern in spending and paying off your bill, instead of just using it for emergencies and large purchases.
4 – Apply. You can call your creditor’s toll-free numbers (usually located onthe back of the card) or visit their web site and find an application.
Get A New Credit Card or Line of Credit
Just like a line increase, a new account gives you more available credit, and a reduced ratio.
A new credit account will instantly increase your revolving debt-to-credit ratio.
A lot of people think that having next to no credit accounts is good. NOT TRUE! As explained in our Diversify Your Credit section, it actually helps your credit score to have a good balance of many credit accounts (that have low balances). So, if you can increase your credit limit AND create a more diversified credit portfolio, then you should.
Find a credit offer that fits your situation
We explain in our Diversify Your Credit section, that each of your credit accounts should serve a purpose, not just be there so you can max it out. Getting a card that gives you rewards for filling up with gas (a necessity for many of us) AND build your score shows a pattern in credit usage (a good thing).
Just remember that with “great power comes great responsibility”. So having more credit available to you doesn’t mean getting more “things”. It means using your credit to build a better life.
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Our Recommendation:
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Debt consolidation is when a third party company negotiates down the interest rates with your creditors to dramatically low levels – making payments affordable enough for you to reduce your debts. In exchange, the creditors are able to put a pretty large negative mark on your credit score.
It’s hard for ArcherCredit to recommend a service that hurts your score. The only situation in which credit consolidation is a viable option is when you’ve tried every other option (like all the ones above), and unless you do something drastic, things might get a lot worse.
