There are a number of questions I get asked about Credit Cards – but the two most common are, “What if they take away my Available Credit?” and “What about my Credit Score?” Let’s tackle both of these.
The “Available Credit” question stems from a combination of two concerns. First, you’re concerned you have too much debt out there and you’re worried if “they” (yes, the evil Credit Card companies) send you a letter informing you that your available credit is now reduced to $100.00 more than you already owe.
Your second concern is that you remembered this is what happened to many people (perhaps you) when the economy crashed in 2009 – 2011. These are both real concerns. If you’re carrying too much debt and worse yet, you have no cash reserves – when your available credit is taken away – you will have no wiggle room other than current income to pay bills. You are correct to worry.
The credit card industry checks your credit history frequently – and if they see too much debt and a weakening economy – you can bet your bottom dollar those letters will be coming your way – at the worst possible time. We have noticed this to be on the rise the last two months. It’s like an early warning sign ahead of the economic news. Keep in mind, we all learn by our mistakes. The banks learned from the Financial Crisis that they should have trimmed credit sooner in 2009 – 2011. You can bet they will act faster the next time around.
While we all learn from our mistakes – we don’t always modify our behavior to prevent those mistakes from recurring. Presently, as reported in Bloomberg.com, consumer revolving credit is at an all-time high – and recently witnessed a $10 billion monthly bump, the largest since November 2017. What this says to me – is that “consumers” who learned from their mistakes back in 2009-2011 – have not taken it to heart – are facing the same problem once again – and disaster looms for those whose credit is taken away.
So, what’s the solution? Here’s my take. You need to get some cash in reserve right away – because if the available credit is taken – it’s not going to come back in short. If your credit has already been taken – or when it is – the smart play is to get rid of that credit card debt – and I mean get rid of it by not paying it. You do this through Debt Resolution which is our method (not Debt Settlement or Debt Consolidation) – developed by THAV GROSS to eliminate the debt outside of bankruptcy – or – you use the bankruptcy laws to do so. Our advice is to pick the course to shed the debt the fastest way at the least possible cost. We analyze both – and that governs our recommendation.
Now cometh the second question, “Okay Ken, But what about my credit score?” My answer is – don’t worry about it. If you’re not about to buy a house, it does not have any significant impact compared to the benefit of eliminating the debt. Yes, your score will suffer when you opt to stop paying the 20% interest that is sucking your finances dry and leaving you no hope to ever retire. But guess what? Credit scores recover rapidly. When you resolve the debt through debt resolution or bankruptcy – the credit score returns in about 1 to 1 ½ years – and ends up higher than before. The reason is that your score is impacted by the total of your debt, your pay history and your available credit. When you are in shut down mode on available credit – your score is already on the decline on two of the three factors – too much debt and declining available credit. When you resolve the debt – those two factors push the score up and compensate for the short term hit on your pay history.
Is it this simple? Believe me – the answer is YES! Turning yourself around so that you can save money for retirement requires a change in course – but it is not that tough. The first step is to get the right information and then you need to take action.
On these points – the great news is we have a FREE SEMINAR this coming Wednesday, November 6th, “Learn the Switch from Debt to Savings.” You and your friends are invited. Nothing fancy – no dinner, just cookies and great information. Sign up below to “Learn the Switch!”
Have a great weekend – and enjoy the extra hour of sleep tonight!
P.S. Did you know that THAV GROSS offers free consultations for business, financial, and tax problems? Call us anytime – (248) 645 – 1700 or CLICK HERE to send us a message.