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Tackling Your Holiday Credit Card Debt


Tackling Your Holiday Credit Card Debt

You may have began the holiday season with a firm conviction: I will not overspend this year. I will only spend what I can afford. I will not go into debt. Yet the truth is that despite the best intentions, we Americans are notorious for digging ourselves into big financial holes during the holidays.

If you find yourself wanting to run away and hide from your impending credit card statements, this article was written specifically with you in mind. It is too late to undo the damage your holiday spending sprees may have caused, yet that is no excuse for wallowing in self pity for the next few months and allowing the damage to fester.

Excessive credit card debt can place a burden upon you financially and can damage your credit scores as well. As a result, it is important for you to take action immediately so that your credit and your finances can start to recover.

Make a List, and Check It Twice

The first component in your post-holiday recovery plan needs to be a detailed list of the damage which has already been done: aka a list of your outstanding credit card balances. You should begin the list by writing the smallest balance at the bottom and working your way upward. Here is an example to help you get started.

·        ABC Bank Card: $2,000 Balance

·        XYZ Bank Card: $1,500 Balance

·        QRS Bank Card: $800 Balance

Start at the Ground Floor

Credit card debt harms your credit scores even when you make all of your monthly payments on time. The reason why credit card debt can cause so much credit score damage is because 30% of your FICO credit scores are largely based upon your revolving utilization ratio (aka your credit utilization). Your credit utilization is basically the relationship between your credit card limits and your credit card balances. The closer your balances climb to your limits the worse the impact will be upon your credit scores.

Credit scoring models like FICO and VantageScore pay attention to the credit utilization ratio on all of your credit cards combined and also to each of your credit card accounts individually. This means that each time you pay a credit card account off you will probably see at least some credit score increase. In fact, when you pay a credit card balance down by even a mere 10% you might begin to see some positive credit score movement.

By paying off your lowest credit card balances first you may be able to bring about a positive increase in your credit scores more quickly. For example, paying off the $800 on the card with the smallest balance in the example above (QRS Bank) would probably help your credit scores more than if you paid the same $800 on either of the cards with the higher balances (ABC Bank or XYZ Bank). Starting at the ground floor and working your way up as you pay off your credit card debt will give you a lot more bang for your buck.

A Commitment to Change

The most important step you can take as you work toward eliminating your holiday credit card debt is to resolve to break the bad habit of overspending once and for all. In fact, if you will cut your spending in other areas you could free up additional funds to help you wipe out your credit card debt much more quickly. Paying off your credit card debt may not be easy and no one ever said that cutting spending is fun, but making a positive financial change is worth the sacrifice. Take control of your finances so that your finances won't control you.



Michelle Black is an author and leading credit expert with nearly a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.


5 Expert Tips to Improve Your Credit In the New Year


5 Expert Tips to Improve Your Credit In the New Year

Skeptical about making New Year's resolutions? If you are it is understandable. People are notorious for setting big goals at the beginning of a new year and failing to follow through with their plans. However, even if you have tried and failed before, the new year can still mark a perfect starting point for you to finally begin your journey toward better credit.

You should not view the process of achieving better credit as a race or, if you do, you should at least consider it to be a marathon. Good credit simply will not happen overnight. There are 2 essential elements which you must possess if you ever truly wish to improve your credit: a solid plan and consistency.

The 5 steps below can go a long way toward helping you to build your "better credit" plan. You can even hire a professional to construct a personalize credit plan for you and to help guide you through the credit restoration process. However, the consistency piece of the puzzle is going to be 100% up to you. If you want to truly succeed in the task of improving your credit then you have to determine that this is going to be your year to stop making excuses.

1. Pull Off the Band-Aid

Before you begin building a plan to improve your credit it is important to understand exactly where your credit stands right now. There is only one way to gain this understanding and that is by taking a long, hard look at your 3 credit reports - Equifax, TransUnion and Experian. Thankfully you can access your 3 credit reports free of charge each year via the website (Note: your credit scores are not free. However, you can still access all 3 of your scores rather inexpensively via a credit monitoring trial offer such as those found at

Once you have your reports you should comb your credit reports line by line for errors (on your own with as part of a professionally guided credit analysis). Errors on credit reports occur more commonly than you would think. In fact, in 2013 the FTC estimated there to be over 40 million mistakes on the credit reports of US consumers.

Credit errors matter because they have the potential to damage your credit scores - perhaps significantly so. Even credit report errors which you may deem to be minor can potentially drive your credit scores downward. Thankfully, if credit reports errors do arise you have the right to dispute these errors with the credit reporting agencies and with your creditors. Again, these disputes can be handled on your own or by hiring a reputable professional to help you.

2. Understand that Paying Your Bills On Time Is Non Negotiable

It is important to understand that the purpose of credit scores is to show your future and even current lenders the likelihood of you making late payments. In general, most lenders will not want to do business with you at all if your credit shows a pattern of late payment history. FICO scores specifically are built with the stated design objective of predicting the likelihood of a consumer becoming making a late payment on ANY credit obligation within the next 24 months. Remember the statement above about how it is time to stop making excuses? If you do not stop justifying late payments to yourself now then you will never be able to achieve the goal of earning better credit

3. Realize that Your Credit Card Balances Are a Big Deal

While credit cards themselves are not inherently evil the truth is that carrying credit card debt is a bad idea. When you develop the habit of charging more on your credit cards than you can afford to pay off in a given month you are setting yourself up for financial problems and you are causing damage to your credit scores. Most people do not realize that even if you pay your credit card balances on time every single month the mere fact that you are revolving a balance can have a negative impact upon your credit scores.

Nearly 1/3 of your FICO scores (30% to be exact) are based upon the "Amounts Owed" category of your credit reports. The credit scores calculated from this credit report category are primarily based upon the relationship between your credit card balances and your credit card limits - aka your revolving utilization ratio. Just remember, as your credit card balances are paid down your credit scores will generally increase. As a result, paying down your credit card balances (from the smallest balance to the highest) is one of the most effective and actionable ways that you can work to improve your credit scores.

4. Consider the Value of Asking for Help

You have the right to work on your credit alone, but it is also your right to seek professional assistance. Yes, hiring a pro is going to require an investment on your part but it could be well worth your time and money to have an expert advising you and working on your behalf. Remember, you can lose weight without a personal trainer as well but I can tell you from experience that you will probably be much happier with your results if you take the step to work with an expert.

5. Get to the Root of the Problem

The majority of credit problems stem from the same place - overspending. When you overextend yourself financially and begin to revolve credit card debt from month to month you are setting yourself up for a financial disaster down the road. It is no secret that credit card debt leads to lower credit scores and a lot of money wasted through interest fees.

Generally most overspending problems develop in the first place due to a failure to plan - that is to say a failure to budget. You have probably heard the following saying: "Failure to plan equals planning to fail." The saying is 100% accurate. In order to truly succeed in breaking the habit of overspending you need to create and follow a written budget. (CLICK HERE for a free copy of the HOPE4USA Basic Budgeting Guide.) If you find yourself cringing at the thought of writing and following a budget remember that even though doing so may not sound like at lot of fun to you the negative repercussions that you can create for yourself through overspending are much more uncomfortable to experience.  

The Value of the Resolution

If you are making resolutions about your finances and credit this year then you should begin by resolving not to let your fear of failure hold you back. Take a deep breath and set a big goal. In reality you might fall short of your goal to improve your credit by 100 points over the next 12 months. However, even if you improved your credit by just 10% it could potentially make a very positive, very tangible difference in your life.  

Michelle Black is an author and leading credit expert with over 15 years of experience, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars nationwide. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.