Avoid Cutting Up Cards to Combat Debt Says Equifax
With the credit crunch putting people’s finances under increasing pressure, financial services firm Equifax has advised struggling consumers to avoid the urge to cut up their credit cards in an effort to reduce spending.
The group reports that while effective financial management should be a top priority for those having difficulties with debt arising from credit cards or loan repayments, cutting up cards could make obtaining credit in the future more problematic. While money markets become less generous, many creditors are beginning to offer new packages on a more stringent basis, the firm asserts. For those with a history of missed loan and credit card repayments, obtaining credit may become impossible as lenders look to minimise risk.
As a result, the firm asserts that it is important that existing cards remain usable in case future credit is hard to come by, although Equifax advises that reining in spending should still be a principal course of action for those struggling with debt. For those who find themselves in a situation where they are unable to secure a new deal, a bad credit loan may be of assistance in allowing people the capital to get finances back on track and begin making regular payments towards existing debt.
“A natural instinct when getting to the point of facing too much debt, especially on credit cards, is to cut them up” asserted Neil Munroe, external affairs director at Equifax. He added that while it is important to cut unnecessary spending, existing cards may be useful later on.
“If they have had a record of debts and defaults then they will find that new applications may not be accepted. So our advice is stop using credit cards and do everything possible to pay off outstanding balances, but don’t cut them all up,” he continued.
Mr Munroe also advised that it is vital that consumers do not forget about cards on which there is an outstanding amount, as missed payments will be logged on credit reports and could potentially jeopardise future credit card applications.
The group has also issued advice for those managing their finances on a month-by-month basis, with priority items of payment identified such as mortgage contributions and rent described as a “must-pay item”. Consumers should also remember that utility bills in the winter are likely to be higher than those for the more temperate months, the company advises. Paying off debt is also identified as the first financial concern to be addressed, with putting money aside said to be ineffective if there are mounting credit card and loan repayment debts to contend with.
For those who are having difficulty finding the extra cash required to clear such debts, a bad credit loan may help to stem the tide and allow people to fulfill their repayment responsibility.
Equifax advises those who are experiencing difficulty finding credit to obtain a copy of their credit report to allow them to assess their financial situation realistically.
In other recent debt management advice, price comparison service moneysupermarket has suggested that while paying bills by direct debit might be convenient, it should not stop people from thoroughly reviewing bills for inaccuracies or overpayments.
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