In my January column, I asked you to face your fears. This month and in April, I want you to use the notes you made then to create a plan that will help you put your fears behind you and get out of debt. One of the worst kinds of debt most people face is credit card debt. If you can't pay the full amount you owe right now, here are the steps I want you to take.
- Check your credit rating by logging on to myfico.com. Creditors use a rating system called FICO (Fair, Isaac and Company), which assigns a numeric value to your credit habits. It will cost you $12.95 to do so. To get the lowest possible interest rate on your credit cards, you need to have a FICO score between 720 and 850. If you're below 620, you're in trouble, and you can work with the simulator on the site to see how you can raise your score.
- Call your credit card companies. If your FICO score is good (above 720), tell each one that if it doesn't lower your interest rate, you'll be transferring the balance to another credit card company. To find great rates or better cards, log on to bankrate.com or lendingtree.com.
- Ask to have your credit limit lowered. If you continue to overspend, you can have the limit lowered to just the amount you would need in an emergency.
- Pay more than the minimum amount due each month by as much as is possible to the highest interest rate card you have. When the balance is paid off, apply the entire monthly payment you were making on this card to the payments you are already making to the card with the second highest interest rate. And keep on rolling down like this until all your debt is gone.
- Find help. If you doubt that you can do this alone, contact the National Foundation for Credit Counseling (NFCC) to find one of their credit counseling services in your area (800-388-2227; nfcc.org). NFCC credit counselors are experienced, helpful, relatively inexpensive, and they can negotiate a lower rate and/or a repayment schedule for you.
- Feel proud of yourself for taking the crucial steps to put your debt behind you, so that one day soon you can be more and create more for yourself.