Struggling to pay your credit card bill can feel overwhelming, but missing payments doesn’t have to spell disaster for your credit score. Whether you’re facing temporary financial hardships or ongoing challenges, it’s crucial to take action to minimize damage. Sometimes, it’s becomes a difficult situation where you can’t pay your credit card bill.
Often, it happens because life throws a curveball at us with circumstances such as sudden medical expenses and losing our jobs, among other things. Taking action quickly to limit damage and improve your credit score after missing payments is important.
In this article, we are bringing to you insights on how to manage your finances when you don’t have enough money to pay off your credit card bill and improve your credit score after missed payments.
Priyank Shah, Co-Founder and CEO of The Financialist, suggest liquidation of the assets to falling into debt trap. “If you have liquid assets such as fixed deposits, mutual funds, equities or similar assets that cover the credit card bill amount, it’s important to liquidate them to pay the bill. Not only the interest rates are higher on the credit card bill but it also affects future borrowings adversely,” said Shah.
If you neither have enough liquid assets nor an adequate bank balance, another option could be to convert the entire bill amount into EMIs. It’s better to convert the balance to EMI then to totally ignore the credit card bill.
If you have multiple borrowings, decide which ones to pay first based on their interest rates and how they affect your credit score. Try to keep at least one account in good shape to protect some of your credit score. If you have to miss a payment, it might be better to miss one on a card with lower interest instead of one with higher interest or a loan.
If you’re struggling to manage your debt because of a large outstanding balance across multiple credit cards, consider taking out a personal loan. The interest rate on a personal loan is typically much lower than that of credit cards.
After you’ve handled the immediate problem, focus on rebuilding your credit score:
The most important thing for your credit score is your payment history. Set up automatic payments or reminders so you never miss another payment. Even small payments made on time can help your score.
If your credit score has been negatively impacted, a secured credit card can help you rebuild it. With this type of card, you put down a deposit that becomes your credit limit. Use it responsibly and pay on time to slowly improve your score.
Regularly look at your credit report for mistakes. You can get a free report once a year from each of the main credit bureaus. If you find any errors, report them right away.
Try to use less than 30% of your available credit. This means if you have a Rs. 1,00,000 credit limit, try not to use more than Rs. 30,000.
While you might want to improve your credit, opening too many new accounts quickly can hurt your score. Instead, focus on managing your existing accounts well.
Missing a credit card payment can cause problems right away, but taking quick action and following these steps can help you manage your debts and start rebuilding your credit score. Remember, getting better takes time and discipline, but with a good plan, you can take control of your money future again.
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