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Proper management of credit card debt can increase credit score

Although credit cards are often cited as the reasons for unmanageable debt and the associated financial stumbling blocks, many of the beliefs New Jersey consumers have about credit cards are myths. Credit card debt is not necessarily bad, and it can actually be beneficial if it is managed in a responsible manner. Unfortunately, the responsibility requires debt management skills and self-control if adverse consequences are to be avoided.

Myths about credit cards include the belief that this type of debt will ruin a person's credit score and also the misconception that high interest will have to be paid. Both these are only true in cases in which the card holders fail to pay the full outstanding amounts every month. Interest is only charged on debt that is unpaid at the start of a new month, and more than a third of a FICO score is determined by a consumer's payment history -- so prompt and full payment every month will be beneficial.

Another concern of many is that unauthorized debt will be caused if a credit card is stolen, but timely reporting of a lost or stolen card can save the card holder from being held responsible for those debts. Some believe that applying for a new credit card will damage the card holder's credit score. While it is true that the score may drop slightly after an application for a new credit card, it is only when an individual applies for multiple cards at the same time that it may create the wrong impression and cause a more substantial drop in FICO score.

Many New Jersey consumers land in unanticipated financial difficulties due to job loss or unexpected, costly medical procedures. Unfortunately, credit cards are often used to manage these crises. Whether it is to buy necessities to continue caring for their families, or to pay other credit card debt, the results are often a devastating spiral of debt that becomes overwhelming in no time. The most appropriate step to take as soon as a consumer recognizes looming financial problems may be to consult with an experienced bankruptcy attorney to learn about the available remedies.

Source: wisebread.com, "5 Unfounded Credit Card Fears", Dan Rafter., May 18, 2016

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