Leaning on credit cards can be helpful when there’s an emergency or you don’t want to worry about your bank balance at the grocery store, but the usefulness wears off once they’re maxed out. And then you’re left with no emergency credit—and additional debt.
While there are tools and methods you can implement into your lifestyle to help you pay off your debt, it can be overwhelming to know where to start. If you’re unsure whether you should pursue credit counseling, here are some signs that indicate you could benefit from professional financial guidance.
Making Late Payments
Late or missing payments aren’t only stressful, they can significantly impact your credit score. Once you’re 30 days past due, you could see as many as 100 points get knocked off your score, which can be especially harmful if your credit score is already low.
Making Minimum Payments
As long as you’re making your payments on time, paying the minimum can help you keep your credit score in good standing. The challenge comes when you can’t pay your balance off because you’re only covering the interest. As of Feb. 15, the average credit card interest rate was at 24.61%. With interest rates like that, it’s hard to make any headway with minimum payments.
High Credit Utilization
Credit utilization is a significant factor in the way your credit score is calculated. To ensure you don’t get negatively impacted, you shouldn’t use more than 30% of your available credit. Simply by having credit card debt that’s too high can bring down your credit score.
Looking for Budgeting Help
Budgeting can be harder than it seems, and if you’re dealing with credit card debt and don’t know where to start, a credit counselor can help. When you make an appointment, your counselor will go over all your household expenses and debts to create a budget that works for you.
You Want to Consolidate Debt
Through a debt management plan, your credit counselor will work with your credit card companies to consolidate your loans into one monthly payment and often get your interest rate reduced down to 6%–10%.
It’s important to understand that while certified credit counseling agencies are nonprofit, you’ll generally pay a small fee of $40 per month to cover the costs associated with the management of your program. But you’ll ultimately save money in the long run while paying your debt off faster and more efficiently.
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