If you have credit card debt, the chances are that the debt you carry could influence your independence. Using credit in the right ways can help you boost your credit score and get you better interest rates on loans such as your mortgage or vehicle loan. However, missing credit card payments or using too much of your credit can significantly, and negatively, impact your ability to borrow.
Credit card debt is unsecured debt, which means that it is riskier for lenders. Lenders balance this risk by looking at your credit score to determine how much they should lend to you and if you’re a reasonable, responsible borrower.
People often accumulate debt by taking out multiple credit cards with varied limits and terms. While many people do pay those cards off on time and according to their contracts, some fall behind due to medical emergencies, economic problems like job loss or cut hours and other reasons.
When you don’t make your payments on time, your credit score takes a hit. If you spend too much of your credit limit, your credit will take a hit, too.
Credit card debt has benefits, but there are downsides, too
Credit card debt can be extremely helpful when you’re trying to buy something out of your price range or to obtain gifts or deals that are only available through using a certain card. Some people collect airline miles for trips around the world. Others get cash back after spending on their usual purchases.
Unfortunately, credit cards can be negative, too. When you start getting close to your limit, the lenders will report to the credit agencies. Your credit score could go down as a result and leave you with a score too low to take out a decent consolidation loan or to rent somewhere you’d like to live. Carrying a heavy debt burden in comparison to your credit limit makes it appear that you cannot handle your money well, and that’s something lenders take seriously.
If your credit is negatively affecting you, there are steps you can take to eliminate those debts. Whether through consolidation or bankruptcy, you may be able to improve your credit score and move forward with better financial security.