Before I get into your possible options, I want to make an important point: don’t miss out on or delay minimum payments while planning your strategy. This will lower your credit score and take some of the best solutions off the table.
With that said, here are four different ways to edit it now.
1. Transfer your credit.
In 2020, zero-interest introductory credit transfer offers on cards were rare, but more are coming, says Sara Rathner, credit card expert at personal finance website NerdWallet. These cards typically pre-charge up to 5 percent of the transferred credit. So this only works if you get an introductory contract that is long enough to take a heavy toll on your credit. This spring, Rathner noted, the US bank’s Visa Platinum card offered one of the longest interest-free periods: 20 months. The Citi Double Cash card offered 18 months with no interest.
2. Ask for a break.
COVID has made card issuers more flexible. As of early 2020, around 83 percent of people who asked for an interest rate cut have received it, LendingTree reports. Many issuers have special programs for cardholders in trouble, said Bruce McClary of the National Foundation for Credit Counseling (NFCC). He says you should tell your lender that the coronavirus has affected your finances and you intend to keep your payments and reduce your balances, but that more favorable terms would help. Your issuer could cut your interest rate for six to nine months, he says.
3. Refinancing with a personal loan.
Check with your credit union or bank to see if you can combine all of your card debt into one lower-interest loan. The average interest rate on a two-year personal bank loan at the end of 2020 was less than 10 percent, according to the Federal Reserve. This may be a better deal than you can get from your card issuer. Do not borrow against your house or car to cash out your card; this creates a new risk of losing your property. And don’t reach for “debt consolidation loans” from companies you’ve never heard of. The chances are too high that they will charge you with new fees or, worse, scam you.
4. Get an exercise plan.
A last resort is to create a payout schedule through a nonprofit credit counseling agency, which you can find on NFCC.org. A counselor will go over your income and debts for free and see what is feasible. Then the advisor will negotiate with your lenders and usually get their buy-in for a payment plan that will lower your interest and monthly payments and possibly cancel some debts. If you reject the plan, you will be no worse off than you were before. Accept it and you pay a monthly payment to the advice center, which in turn pays the issuer. You’ll likely pay a small fee and ditch the cards included in the plan. But over time, you will be able to repay debt and rebuild credit. More importantly, you can get rid of the burden and worries of your debt.