You are a conscientious bill payer. You make sure you pay at least the minimum payment on all your credit cards every month, your rent and utilities are always paid on time, and no collection agency has ever had the need to ring your phone. You may not have a lot of money in the bank, but you have always made sure to pay your bills on time to maintain your excellent credit. Then you tried to get a loan and were turned down because of your credit score. It wasn't your payment history, overdue accounts, or even your debt ratio; it was all those maxed out credit cards that hurt your score. Fortunately, this is the easiest credit problem to fix. If you follow this simple advice, you can bounce back from maxed out credit cards in no time flat.
This means department store cards, chain store cards, and gas cards. The loyalty points that you may receive for using these cards are not worth the exorbitant interest rates they charge. Cut them up now and try to double your monthly payments on these cards in order to pay them off faster. If you cannot double the payment on all of them, then just start with one. One department store credit card with an interest rate of 27% (which is typical) and a $1000 balance will take you 27 months to pay off if you make payments of $50 per month, and only 12 months to pay off if you make $100 payments. It will also save you almost $200 in interest that can be then applied to another card.
If you have a great history of making your payments on time, your credit card company may be inclined to lower your interest rate. A lower interest rate means that your minimum monthly payment pays more to principal and less to interest. This allows you to get out of the maxed out situation faster without paying any extra money. Just call the number on the back of the card and ask nicely. They want to keep your business and prevent you from going to a competitor, so the answer is quite often positive.
This is a fabulous way to get rid of maxed out cards. Talk to your bank about eliminating all your credit card balances and rolling them into one lower interest loan. Often, your monthly payments can be cut in half, allowing you to put a little bit into savings. What you need to avoid is running your credit cards to the maximum again, as then you'll be stuck with a loan and maxed out cards. Once your credit card balance is zero, it is a good practice to use credit cards only when you need them, for things like booking a hotel or renting a car, and use your debit card or cash for everything else you purchase.
Being in debt can seem all-encompassing at times. It seems the more you pay, the more you owe. It does not need to be so overwhelming. Start with small steps like eliminating one credit card or doubling the payment on one card, and you will not believe how it all starts to snowball. Stick to a budget and make purchases carefully and you will find yourself out of the red and into the black in no time.