See the first four great, surprising credit repair tips in part I of this series.
Credit repair tip #5: Don't pay off existing card balances with an introductory interest-free card.
"Balance transfers can work in your favor if the interest you save outweighs the transfer fees," explains Leslie McFadden. However, "you have to be careful that you're not running up so much of the new card's credit limit that it's hurting your score." Consolidating your balances can make the credit bureaus think you're maxing out that new card.
Plus, when the introductory interest-free period runs out, you may suddenly find yourself paying an interest rate that's higher than the card you transferred the balance from.
Credit repair tip #6: Don't borrow from your house to pay off credit card debt.
The upside? A lower interest rate and the ability to consolidate your debts into one payment -- usually a lower payment. The downside? Potential for disaster. Do not put up your house as collateral for existing debts. If you can't make your payments for any reason, you could face foreclosure.
Credit repair tip #7: Don't dismiss rewards cards that charge an annual fee.
There are lots of rewards cards that don't charge an annual fee, but you should weigh the overall benefits of each card. If the rewards a card offers are more suitable for you, it might be worth it. Try to project what rewards you'll take advantage of each year and see if they are worth more than the card's annual cost. If there's no card out there with similar benefits but no annual fee, you could be better off paying that fee.
Credit repair tip #8: Consider paying off your lowest-balance credit card first.
If you're a very disciplined person with a plan to pay off your credit card debt as quickly as possible, you probably know that this isn't the very fastest method. Paying down your highest interest-rate credit cards first will save you money.
What paying off the lowest-balance card can do for you is keep you motivated. When you're overwhelmed by debt, it's often hard to stick to that disciplined plan. The great feeling of finally paying off one of your credit cards could be just the reward you need to keep going.
Pay as much as you can on your lowest-balance card while still paying the minimum payment on the other cards. Once that card is paid off, continue to apply the money you were using to make those payments as you pay off the next lowest-balance card.
Related Resource:
"8 Surprising Ways to Save Your Credit Score" (Dave Baldwin, Real Simple: Secrets of Saving Money)
