Does It Go Against Your Credit Record if You Cancel a Credit Card?

In the battle to get out of debt, you may be inclined to cancel one of your credit card accounts. While this can help you avoid accumulating more debt, it could also negatively affect your credit score. Before canceling your card, there are a few credit score issues to consider.

Credit Utilization Ratio

When you cancel a credit card, it could potentially hurt your credit utilization ratio. This is a ratio that is calculated by looking at your credit balances in relation to the total amount of credit that you have available. If you cancel a card once you pay it off, you are also losing all of that available credit. This could raise your credit utilization ratio and lower your credit score as a result of this change.

Length of Credit History

Your credit score is made up of several factors in relation to your credit history. One of the factors that plays a role is the length of your credit history. When you have had credit for many years, it looks more attractive than if you just opened up your first credit card account. If you cancel a credit card that you have had open for the longest amount of time, this can shorten your available credit history and hurt your credit.

Number of Cards

Even though canceling your credit cards can have negative effects, it can also help your score in other regards. One of the most common problems that people have is that they hold too many credit card accounts. If this is the case, canceling one of your card accounts may actually improve your credit. This would lower the total number of credit card accounts and help you get down to a more reasonable number.

Stopping Credit Card Use

When you decide that you no longer want to use your credit cards any longer, you may wish to cancel your account. Instead of taking this approach, you may want to simply cut up your cards. When you cut up your cards and just leave the accounts open, you will not use your card to accumulate more debt. At the same time, you leave your account open and maintain the length of credit history that you have on your record.

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Georgia Debt Reduction Laws

Under Georgia law, lenders can sue customers who do not pay their debts. Usually, the lender has four years to sue the delinquent consumer under Georgia state law. Credit-related lawsuits can lead to devastating financial consequences. Some debt reduction programs, including the federal bankruptcy process, can prevent the consequences of unpaid consumer-oriented bills.

Credit Counseling

Some credit counseling programs can help state residents get out of debt faster, notes the Georgia Department of Banking and Finance. But Georgia citizens should carefully research a credit counseling agency before using its services. Some agencies offer debt management plans, which allow a consumer to repay his debts at reduced interest rates. Also, credit counseling with a federally-approved agency is required before any Georgia resident can file a bankruptcy case.

Chapter 7 Bankruptcy

People earning less than Georgia's annual median income level can request elimination of many pre-existing bills under Chapter 7 bankruptcy. As of 2011, the qualifying income for a single Georgia resident was $39,384, while the figure for a couple was $52,024, according to the U.S. Trustee Program. A family of three could earn up to $56,682 a year, while a four-member household could bring in up to $69,239 annually. While Chapter 7 reduces a consumer's debt load, it does damage credit ratings for 10 years from the date of filing.

Chapter 13 Bankruptcy

Georgia residents who did not qualify for Chapter 7 or simply want to partially repay debts can file for Chapter 13 bankruptcy. A Chapter 13 plan takes three to five years to complete. During a Chapter 13 plan, a debtor cannot get new credit accounts without a Georgia bankruptcy judge's permission. Also, no type of bankruptcy covers recent tax bills, child support, alimony, court fines or bills charged right before requesting debt reduction. Only in rare cases of serious disability or a college's negligence will a Georgia bankruptcy judge forgive federally-backed student loans.

Asset Considerations

If you have resided in Georgia for at least two continuous years before filing bankruptcy, you can invoke state asset exemption laws to protect some of your property. As of 2011, you could keep up to $10,000 of homestead equity if you are single and up to $20,000 if you are part of a legally-recognized couple, notes Bankruptcy Action. You can also retain up to $5,000 in household goods, a motor vehicle worth up to $3,500 and $500 worth of jewelry.

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How to Stop Stressing Over Money

Money, or the lack thereof, can be a major cause of stress and anxiety. As the economy continues in a downward spiral of spending, debt, increasing interest rates and joblessness, it is difficult to keep one's mind from straying toward negativity. Take a few steps to clear your mind of monetary worries and make a plan to fix your finances for the future.

Instructions

1

Plan a budget. To ease your mind about your personal finances, you must know your current financial status. Determine your level of debt, minimum monthly payments and expenditures and try to learn about your spending habits. By analyzing what money you spend and why you spend it, you can help keep unnecessary spending under control and potentially eliminate it to help get out of debt.

2

Make a plan and know what you need and what you do not need. Try to check yourself when shopping and only buy what is on your shopping list. If you eliminate unnecessary spending, you will find the amount of money you save is significant. If you feel that you have to go shopping for stress relief, try to make it into a game. Go online shopping first and bargain hunt. Check out sites like eBay, Craigslist and other major retailers to see where you can get the most bang for your buck. After researching, you may find that you just needed the "thrill" of shopping or finding a good bargain -- not just the actual acquisition of goods.

3

Use coupons. Using coupons can make any shopping trip feel more productive. By buying the things you actually need and using coupons to buy them, you will feel more at ease with your purchasing decisions and can help decrease your debt-causing habits and patterns.

4

Step away from the computer. Staring at your bank account and mounting debts can increase a person's anxiety in virtually no time. If you find that your hands are clammy, your heart is racing and your head gets foggy when you start to look at your bank account, try to step back, clear your mind and focus on something else for a little while. The best time to consider your finances is when you are cool, calm and collected. Analyzing your financial woes when you are in a panic will do nothing but increase your anxiety levels and keep you from seeing the real overall picture of your situation.

5

Put aside some fun money. Give yourself a little bit of fun money to use every month. Working only to get out of debt can keep you focused on the negatives of money and can detract you from the benefits of having it. If you are only focused on getting out of debt, your money will not seem like a reward, but a curse. Try to keep a set amount of money in your budget to play with so you feel rewarded at the beginning or the end of the month for all of your hard work.

6

Don't be afraid to ask for help. Talk to your friends, family or seek professional advice about your financial situation. Sometimes an outsider's perspective can be exactly what you need to ease your worries and come up with a solution.

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The Best Debt Management Solutions

With credit card balances and interest fees consuming your financial resources and sanity, you may look to a third party debt management firm to help you get back on track. When it comes to choosing a debt management service, there are many providers and types of companies -- and many operate programs as unique as each of our financial situations. Consider various factors when choosing the group best able to work with you to help alleviate your debt load.

Inspire Confidence & Comfort

Working with a debt relief agency is no different than having a business relationship with any other service provider. First, you need to feel comfortable working with this firm and your account contact. The best debt management firms will not push you if you say you are uncomfortable or unclear about what they expect of you. If you feel uneasy about the tactics used by your debt management firm, this particular group may not be the best fit for you and your needs.

Have Low Fees

You should expect to pay service providers fees for their time. However, it is important to understand the fee structure to be a fully informed customer. The best debt management groups will be upfront about their fees and should not have any unreasonable charges that would preclude you from most effectively paying down your debt. Expect some fees, but if you find that administrative costs are chewing up your dollars rather than paying down your debt, you may want to look to another debt management firm.

Be Clear on the End Result

Being debt-free is certainly a goal worth pursuing. But when you expect concessions from credit card companies, prepare to find some strings attached. Debt management programs operate toward the same goal, but depending on the techniques employed, they might affect your credit score and limit your future borrowing ability. Customers that enroll in a credit-counseling program often see their accounts closed with restrictions on obtaining new credit until the plan is complete. Debt settlement firms may provide lower total balances, but at the cost of having charge-offs listed on your credit report. The best debt management groups will tell you what to expect each step of the way. And they will tell you about the potential impact the program may have on your credit profile.

Empower You for the Future

Turning to a third-party debt management service is not something anyone puts on his list of goals to accomplish. Once you complete your debt-management plan and have paid down your debt, commit to never letting it get out of control again. You may need some guidance to stay true to this objective. The best debt management groups will provide education and support to help you establish a budget and identify warning signs that your debt is again spinning out of control.

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The Best Ways to Improve Credit: Revolving Lines of Credit

Improving your credit file can help you get approved for financing easily and save money on it once you do. You could use many techniques to help boost your credit score, but focusing on your revolving credit lines can be extremely beneficial to the process.

Revolving Credit Lines

Debt is actually broken up into several different types, including installment loans, mortgage loans and revolving debt. Revolving debt is essentially a term for credit cards or similar accounts. With this type of debt, your balance can increase or decrease by the month. You are responsible for making a minimum monthly payment on your revolving debt. An example of installment debt would be paying a car loan, while mortgage debt is associated with paying your home loan.

Paying Down Balances

One of the quickest ways to boost your credit score is to pay down the balances on your revolving debt. When you carry maxed out balances on your credit card, it will negatively affect your credit score. If you want to boost your credit score, you need to get the balances on your credit cards down to below 30 percent of their available credit limit. If you can do this, it reflects positively on you when your credit score is calculated.

Making Payments

You can also use your revolving credit accounts to help boost your score by making your payments on time. The most important aspect of calculating your credit score involves the timeliness of your payments. Your credit card companies will report each payment to the credit bureaus and if you make them all on time, this will eventually boost your credit score. If you miss even one payment, it can hurt your credit significantly in a short amount of time.

Regular Use

Regularly using your revolving credit accounts can also help boost your credit score. Many people mistakenly believe that they should not use their credit cards if they want to help their credit score. While you do not want to accumulate a large balance on your credit cards, regular light use can be extremely beneficial. If you make a small purchase with your card every month and then pay off the balance in full, it will increase your score.

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How to Reduce Debt Today

According to Kiplinger, a publisher of business finance advice, the average credit card debt alone for cardholders in their mid-20s to mid-30s exceeds $5,000. Many households are paying interest on auto loans and mortgages in addition to credit card debt. If you procrastinate in reducing your debt, you will just pay more in interest. Start today to reduce your debt and establish better habits for a secure future.

Instructions

1




Start paying cash today.

Pay cash or use your debit card for today's purchases. Stop charging. Jane Bryant Quinn, author of "Making the Most of Your Money Now," says that this simple step contains the key to debt reduction. After all, if you pay off $100 in debt today but charge another $100, your total debt stays the same. You can only reduce your debts if you stop charging.

2

Get a clear picture of your debts. List each debt including name of creditor, amount and interest rate. Plan to start by paying off the debt with the highest interest rate, Kiplinger suggests.

3

Raise money today to put on your debt. Have a yard sale, Quinn suggests, or return unused items to the store for a refund. If you have the sales slips, many stores will give you cash for items you return within a reasonable period. Deposit the cash from your sale or returns in your checking account and use it for debt reduction.

4

Transfer savings to your liquid account for debt reduction. You probably are making way less in interest than you are paying for your debts. Quinn says you should not touch your retirement accounts, however. Financial planner Ric Edelman, author of "The Truth About Money," says you should even sell other investments such as mutual funds or U.S. Savings Bonds to reduce your debt. In some cases, you will not receive your cash immediately, but you can begin the process today.

5

Use the money you have gleaned from all sources to reduce the debt with the highest interest rate. If you have enough to pay this debt off, use the balance to pay down the debt with the next highest interest rate.

6




Plan for a secure financial future.

Resolve today to continue living on a cash basis tomorrow and every day. Plan to use the surplus from your frugality to pay your debt with the highest interest rate until all your debts are paid off. Consider today just the beginning of new financial habits for a secure future without debt.

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How to Settle a Spouse's Credit Cards When the Spouse Dies

After a spouse dies, one of the more difficult aspects of squaring things away is settling his credit card debt. As a rule, debts are paid from the decedent's estate, which is handled by an executor (if there is a will) or a court-appointed administrator (if your spouse died intestate). If you're the designated party responsible for handling your spouse's estate, this means contacting his creditors to inform them of his demise, as well as paying the debt from the existing estate. However, there are also circumstances that may make you personally liable for your spouse's credit card debt; these are established by your state's laws. Always consult with an attorney if you are unsure whether the debt your spouse has incurred can be passed down to you.

Instructions

1

Assess your own personal liability for the credit card debt. Generally speaking, if the credit card belonged only to your spouse and you were only an authorized user of the account, you're probably not liable for shouldering the debt. However, if you were a co-signer on the credit card, both you and the estate may be held liable. However, it's important to note that if you reside in a community property state, you may inherit the credit card debt, even if you were not a co-signer on the account.

2

Inform the credit card company of your spouse's death in writing while his estate is being settled, advises CreditCards.com, a consumer education website. If you're handling your spouse's affairs as executor or administrator, mail the credit card company a copy of your spouse's death certificate, as well as a note that contains the name and account number attached to the credit card. Send all documentation by certified mail and keep copies for your own records. If you're not responsible for your spouse's affairs, his executor/administrator will take on this duty.

3

Handle calls from credit card companies cautiously, the Federal Trade Commission advises, especially if you're unsure that the debt they are contacting you about is valid. Con artists often scour obituaries and legal notices to see who has died so they can pose as debt collectors. Don't give out your own personal information (such as your Social Security number or banking information) if you have doubts. Doing so could make you the victim of identity fraud.

4

Pay the credit card debt from your spouse's estate. If the debt exceeds the amount of the assets, usually the creditor will simply write off the debt. Exceptions apply if you are legally responsible for the credit card debt. Because state laws can vary dramatically on these issues, it's wise to consult a probate attorney if you are unsure whether you are personally liable for the debt.

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