When Should You Be on a Credit Card Time Out?
When You’re Applying for a Home Loan
Both your credit score and debt-to-income ratio are key indicators for lenders when it comes to obtaining a home loan or refinancing your mortgage. Therefore, managing credit card debt within reasonable limits is key. If you are largely dependent on credit cards, now would be a good time to be on a credit card time out. Be careful not to open new lines of credit in the months prior to applying for a mortgage. Also, watch your balances, make timely payments and generally be responsible for your credit.
When Your Credit Utilization is High
Using too much of your available credit hurts your credit score. If you’re carrying balances on multiple cards, it’s easy to lose track. So start by really examining your accounts to see where you stand in terms of debt utilization. If you are seeing high balances on your cards, then it is probably time to be on a credit card time out.
You Are Only Making Minimum Payments
If you can only allocate money to make minimum payments on your credit cards, then you are probably drowning in too much debt. It is best to be on a credit card time out and pay more than the minimum.
If Debt Collectors Are Calling You!
When settling credit card debt becomes impossible, you are bound to get calls from numerous debt collectors. Sometimes, too much debt makes you shift the debt around rather than actually paying it off. Therefore, be mindful of where you are with your finances. If you are seeing warning signs, it is best to speak with your creditors as early as you can. In addition, work on cutting back on spending or reaching out to a financial counseling service to help you rid your debt.
If you are seeking help with credit, speak with a certified counselor at ACCC today. Call 800-769-3571.