Trying to get out of bad credit is a challenge for anyone. Sadly, some people resort to actions that only aggravate the problem instead of solving it. Students especially are prone to committing wrong actions when trying to get out of debt. If you are stuck in bad credit, what are the actions that you should avoid?
Get a payday loan to pay your credit card debt. Payday loans offer a quicker way to getting cash for emergencies but paying debt shouldn’t be one of those emergencies. Yes it’s true that you’re guaranteed to get a payday loan regardless of your credit score but using it just to avoid delaying or missing on your credit card payment is unreasonable.
Why? Because you’ll be surprised at how your fees will soar especially if you fail to pay it back on your next paycheck. Don’t put yourself at risk to incurring more debts than you already have.
Taking out cash advances from your credit card. Don’t be tempted to take out a cash advance from one your credit cards just to pay your unpaid balance with your other credit card. A cash advance incurs interest right after you got the money so if you think you’re helping yourself get out of bad credit, you’re actually only digging yourself in to deeper debt. Never use your credit card to make a cash advance.
Using your retirement savings to pay off your credit card debt. You should be aware that when you take out money from your retirement fund, you won’t be able to get your money in full. You will be charged with 10 percent penalty fee for withdrawing your funds prematurely plus you will be taxed for the amount you took out leaving you with just about 65% of the original amount you withdrawn.
Obtaining a home equity loan to pay your credit card bills. Putting your home in the line is a very, very risky move especially if paying back on time is what put you in debt in the first place.
Experiences prove that there is a tendency for people to continue spending because they have a home equity loan to rely on. In the end, they found themselves stuck in more debt than they can afford to pay and even worse, they also put themselves in danger of losing their home property.
Carelessly transferring balances to another credit card. It is true that transferring over your balances to a credit card with lower interest rates can help you get off your debts more easily. But don’t be too careless about it.
Some credit cards may entice you with a 0% introductory interest but if you don’t check how much the interest would be after the introductory period expires, you may be surprised to see that this card imposes even higher interest rates than your past credit card.
Study the terms and conditions first before transferring over your balances. More importantly, make sure that you can pay off the balances you transferred before the introductory period expires.
Allison May is a credit consultant and a writer for
Credit Creators. The resource provides consumers with valuable advice and information on credit cards for bad credit,credit cards for good credit and other credit-related issues. Its main objective is to help people
build good credit.
